So, you’ve inherited an IRA—great, but now what? The rules for taking money out are tricky, but let’s walk through it to make things clearer. From a high level, it all depends on when you inherited the IRA, who you are to the original owner, and whether it’s a Traditional or Roth IRA. Plus, it matters if the owner passed away before or after their Required Minimum Distribution (RMD) age, which is 73 these days. Let’s break it down.

When Did You Inherit It?

• Before 2020: If you got the IRA before 2020, you might be able to spread out (“stretch”) withdrawals over your whole life, keeping taxes low and letting the account grow. And spouses can simply take over the IRA like it’s theirs and start RMDs at 73. However, if you’re not a spouse, you use your life expectancy (or the owner’s, if it’s longer). And if the owner died before their RMD age, you’ve got five years to empty the account.
• After 2019: Things got trickier for IRAs inherited after 2019, thanks to the SECURE Act. Most non-spouse beneficiaries now have to follow the 10-year rule: you’ve got until December 31 of the 10th year after the owner’s death to take all the money out. No more “stretching” it out for decades unless you’re in a special group.

Who Are You?

• Spouses: You’ve got the most flexibility. You can roll the IRA into your own and wait until you’re 73 for RMDs, or keep it as an inherited IRA and hold off on RMDs until the owner would’ve hit 73.
• Special Beneficiaries (EDBs): This covers minor kids (until they’re 21), disabled or chronically ill folks, or anyone not more than 10 years younger than the owner. You can take withdrawals over your life expectancy. Kids switch to the 10-year rule when they hit 21.
• Everyone Else: If you’re not in those groups, you’re stuck with the 10-year rule.
• Not a Person (like an estate or trust): You might have to empty the account in five years. Trusts are a bit of a headache, so you’ll want to talk to someone who knows their stuff.

Watch Out for 2025

Starting in 2025, if the owner died after their RMD age, non-spouse beneficiaries under the 10-year rule have to take RMDs every year for years 1 through 9. Skip them, and you could get hit with a 25% penalty—or 10% if you fix it quick. The IRS has been pretty relaxed about missed RMDs from 2021 to 2024, but don’t count on that forever.

Taxes and Other Bits

With a Traditional IRA, you’ll pay taxes on withdrawals like it’s regular income. Roth IRAs? Usually tax-free if the account’s been around for five years. The good news is there is no 10% early withdrawal penalty on Inherited IRAs, no matter your age. You could even cash it all out at once, but that might mean a huge tax bill. And if there are multiple beneficiaries, make sure to split the account by the end of the year after the owner’s death.

The Bottom Line

Overall, Inherted IRAs can get a bit tricky, so make sure to work with professional to sort out the details. You’ve got this!