The 10-Year Drain Rule: How SECURE Killed the Stretch IRA

What changed in 2019

The SECURE Act of December 2019 made two major changes to inherited IRA rules for deaths occurring January 1, 2020 or later:

1. Most non-spouse beneficiaries can no longer stretch withdrawals over their own life expectancy. Instead, the entire inherited IRA balance must be withdrawn by the end of the 10th calendar year after the original owner's death.
2. For original owners who died on or after their Required Beginning Date (now age 73 or 75 under SECURE 2.0), the heir must also take an annual RMD during years 1-9 of the 10-year window — and then drain whatever's left by year 10.

The 10-year rule applies to most non-spouse beneficiaries, including adult children. It does NOT apply to "Eligible Designated Beneficiaries":

• Surviving spouses (they can roll the IRA into their own and use lifetime stretch)
• Minor children of the original owner (stretch until age 21, then 10-year window begins)
• Disabled or chronically ill beneficiaries
• Beneficiaries within 10 years of the original owner's age

For everyone else — which is the vast majority of inheritances — the 10-year drain rule is now the law.

Why this is brutal for high-earning heirs

The 10-year rule isn't just an inconvenience — it's a tax acceleration that often lands the inherited IRA's full taxable amount in the heir's peak earning years.

Consider a typical scenario: a 65-year-old retiree dies with $1 million in a Traditional IRA. Their children, in their 40s and 50s, are at the peak of their own careers, earning $150-300K each. They're already in the 24% or 32% federal bracket, plus state, plus IRMAA risk if they're Medicare-eligible by the end of the 10-year window.

The $1 million inherited IRA has to come out within 10 years. If split evenly, that's $100K of additional income per year per child for 10 years — stacked on top of their existing earnings. Marginal tax rate on those dollars: often 32-37% federal + 5-13% state = roughly 40% total. The IRS and state collect approximately $400,000 of the $1 million.

And this is for a $1 million inheritance. The numbers scale: a $3 million inherited IRA can mean $1.2 million in federal+state tax for the heir over the 10-year window.

Why a Roth IRA changes everything

Critically: the 10-year drain rule still applies to inherited Roth IRAs — but Roth distributions are tax-free (assuming the original owner met the 5-year rule).

This is the most important practical implication of the rule change. An inherited Roth IRA can be:

• Left to grow tax-free for 10 full years
• Withdrawn in a single lump sum at year 10 with zero tax consequence
• Or withdrawn gradually if the heir prefers

Compare this to an inherited Traditional IRA, where every dollar withdrawn is taxed at the heir's marginal rate. The Roth version is worth dramatically more per dollar to the heir's family.

This is the single largest case for Roth conversions during your lifetime if you intend to leave money to children. Every dollar converted at your own bracket (often 22-24%) replaces tax that would otherwise be paid at the heir's bracket (often 32-35%). The arbitrage is family-level, and it compounds for years before the inheritance happens because the converted dollars grow tax-free in the Roth.

The annual-RMD twist for post-RBD deaths

The IRS clarified in 2024 and 2025 that the 10-year rule operates differently depending on whether the original owner had already started RMDs at the time of death:

Owner died BEFORE their Required Beginning Date

The heir can defer all withdrawals to year 10 and then take the entire balance. This concentrates the tax hit but maximizes the years of tax-deferred growth inside the inherited IRA.

Owner died ON or AFTER their Required Beginning Date

The heir must take an annual RMD during years 1-9 (calculated using the heir's single life expectancy, not the original owner's), AND drain whatever's left by year 10. This forces taxable distributions every year of the window.

For Roth IRAs, the original owner has no lifetime RMD — so they never have a Required Beginning Date in the same sense. The heir of an inherited Roth doesn't have annual RMDs during years 1-9 and can let the entire balance grow tax-free until year 10.

Coordinating with the brokerage step-up basis

If you have both a Traditional IRA and an appreciated taxable brokerage account, the SECURE Act dramatically changes which one is more efficient to leave to heirs.

• Taxable brokerage at death: Heirs receive a full step-up in basis. They can sell immediately with zero capital gains tax. The entire pre-death appreciation is forgiven.
• Traditional IRA at death: Heirs receive no basis adjustment. Every dollar comes out as ordinary income within 10 years.

This means the "spend-down order" advice from the pre-SECURE era is now backwards for many retirees. The old rule was: spend taxable first, IRA second, Roth last. The new rule for couples planning a meaningful inheritance is closer to: convert IRA aggressively during your lifetime, spend the leftover IRA, leave the Roth and brokerage for the kids.

What to do, in order

If you have a Traditional IRA balance you intend to leave to non-spouse heirs, the priority list is:

1. Model the heir-level tax exposure. Estimate your heirs' marginal tax brackets in 10 years (assume they're at peak earning age). Compare to your own current bracket. If theirs is higher, conversion math is overwhelming.
2. Convert during your lifetime to the highest bracket that still beats theirs. If your kids will be in the 32% bracket and you're currently in the 22% bracket, every dollar converted at 22% saves 10% per dollar.
3. Skew the inheritance toward Roth and brokerage, not Traditional. Spend your Traditional IRA during your lifetime (or convert it). Leave Roth (tax-free to heir) and brokerage (step-up basis) for the kids.
4. Use life insurance for IRA "replacement" if applicable. Permanent life insurance death benefits are income-tax-free. For high-balance retirees, a paid-up insurance policy can replace IRA dollars with tax-free dollars for the heir.
5. Consider Roth conversions even in your 80s. If your heirs are at 35% and you're at 22% even in your 80s, the math still works. There's no upper age limit on conversions.

The Inherited IRA calculator linked below runs the two-generation simulation: your remaining years plus the heir's 10-year window, with both your and their brackets baked in.