About the 10-Year Rule & Distribution Math
How recent statutory changes transformed inherited retirement accounts from multi-decade wealth vehicles into intensive 10-year tax puzzles.
📜 The Death of the "Stretch IRA"
Prior to January 1, 2020, non-spouse beneficiaries inheriting a Traditional or Roth IRA could "stretch" minimum required distributions across their entire remaining statistical lifetime. A 30-year-old heir could take minuscule annual distributions over 53+ years, allowing the bulk of the portfolio to compound tax-deferred for generations.
The passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 abruptly abolished the stretch IRA for most non-spouse beneficiaries, replacing it with a strict mandate: the entire account must be liquidated by the 10th anniversary year of the owner's death.
⚖️ Treasury Decision 10001: The Final 2024–2026 Regulations
For over four years, the financial industry debated whether heirs were required to withdraw funds in Years 1 through 9, or if they could withdraw nothing until Year 10.
In July 2024, the Department of the Treasury and the IRS issued Treasury Decision 10001 (Final Regulations on Required Minimum Distributions), resolving the dispute:
If the original owner died ON or AFTER their Required Beginning Date (RBD): The beneficiary is legally subject to the "at least as rapidly" rule under IRC § 401(a)(9)(B)(i). This means annual RMDs are mandatory during Years 1 through 9, and any remaining balance must be completely liquidated in Year 10.
If the original owner died BEFORE their Required Beginning Date: The beneficiary is NOT required to take annual RMDs in Years 1 through 9. However, the entire account must still be liquidated by December 31 of Year 10.
🧮 The "Minus 1" Divisor Formula
For beneficiaries subject to annual RMDs in Years 1–9, the annual withdrawal is calculated as:
In Year 1, the divisor is obtained from IRS Publication 590-B Table I (Single Life Expectancy) based on the beneficiary's age. In Year 2, the divisor is Year 1 Divisor minus 1.0. In Year 3, it is Year 1 Divisor minus 2.0, continuing sequentially through Year 9.
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