How to Calculate RMDs on an Inherited IRA Under the New SECURE 2.0 Rules

Key Takeaways

Non-spouse beneficiaries who inherit a post-2019 IRA must empty it within 10 years, and annual RMDs are required during years 1 through 9 if the original owner had already reached their required beginning date.
Skipping a required annual distribution during the 10-year window triggers a 25% excise tax. On a $400,000 account with a $28,000 RMD, that penalty reaches $7,000 in a single year.
Calculate each year's RMD by dividing the prior December 31 account balance by the life expectancy factor from IRS Publication 590-B Table I, reduced by 1 for each subsequent year.
Tool: Run your inherited IRA RMD numbers in the CalcMoney Retirement Calculator →

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The Rules Changed in 2020. Most Beneficiaries Have Not Caught Up.

The SECURE Act of 2019 ended the stretch IRA strategy for most non-spouse beneficiaries. Before January 1, 2020, a beneficiary could extend distributions over their own lifetime. That reduced annual tax exposure significantly. That option no longer exists for most people.

SECURE 2.0, signed in December 2022, layered additional changes on top. The IRS then spent three years issuing guidance, finalized in July 2024, that clarified the most contested question: whether annual RMDs are required within the 10-year window when the original account owner had already begun taking distributions.

The answer is yes. Annual distributions are mandatory in years 1 through 9. The full balance must clear by December 31 of year 10.

This matters because many beneficiaries assumed the 10-year rule meant they could take nothing for nine years and drain the account in year 10. That assumption is wrong. It will generate a substantial penalty.

Who the New Rules Apply To

Not every beneficiary falls under the 10-year rule. The rules split beneficiaries into three categories.

Eligible Designated Beneficiaries (EDBs)

These individuals still qualify for lifetime stretch distributions. EDBs include:

The surviving spouse of the account owner
A minor child of the account owner (until age 21, then the 10-year clock starts)
A disabled individual under IRS definition
A chronically ill individual under IRS definition
Any individual not more than 10 years younger than the original owner

If you fall into this category, you use IRS Single Life Expectancy Table I to calculate annual RMDs based on your own age, just as beneficiaries did before 2020.

Non-Eligible Designated Beneficiaries (Non-EDBs)

This is the largest group. It includes adult children, siblings, nieces, nephews, and friends. These beneficiaries inherit post-2019 accounts and face the 10-year rule with mandatory annual RMDs in years 1 through 9, provided the original owner had reached their required beginning date (RBD).

The RBD is April 1 of the year following the year the original owner turned 73. That age increased from 72 under SECURE 2.0.

Non-Designated Beneficiaries

Estates, charities, and certain trusts that do not qualify as designated beneficiaries face a 5-year rule if the owner died before their RBD, or the ghost life expectancy rule if the owner died on or after their RBD.

The Core Calculation: How Annual RMDs Work Under the 10-Year Rule

When a non-EDB inherits from an owner who had already reached their RBD, the calculation follows a specific sequence.

Step 1. Find the beneficiary's age as of December 31 in the year after the owner's death.

Step 2. Look up the corresponding life expectancy factor in IRS Publication 590-B, Table I (Single Life Expectancy).

Step 3. Subtract 1 from that factor for each subsequent year.

Step 4. Divide the account balance on December 31 of the prior year by the current year's factor.

That result is the minimum required distribution for the year.

Worked Example 1: Adult Child Inheriting a $650,000 IRA

Assume the original IRA owner died in September 2024 at age 78, having already taken their 2024 RMD. The beneficiary is a 52-year-old adult child.

Year 1 of the 10-year period: 2025

The beneficiary turns 53 in 2025. The IRS life expectancy factor for age 53 from Table I is 31.4.

Account balance on December 31, 2024: $650,000.

RMD for 2025: $650,000 divided by 31.4 = $20,701.

Year 2: 2026

The factor drops by 1 to 30.4.

Assume the account grew to $641,000 after the 2025 distribution and market movement.

RMD for 2026: $641,000 divided by 30.4 = $21,086.

Year 10: 2034

The factor would be 23.4 (31.4 minus 8, since year 10 uses the factor reduced by 9 increments from the base). The entire remaining balance must be distributed by December 31, 2034, regardless of what that number produces.

This beneficiary will pay ordinary income tax on every distribution. Depending on their tax bracket, spreading distributions across 10 years rather than bunching them into year 10 reduces total tax liability materially.

Worked Example 2: The Cost of Getting This Wrong

A 46-year-old beneficiary inherits a $400,000 IRA in 2024. The original owner was 75 and had passed their RBD. The beneficiary assumes no annual distributions are required and plans to take the full balance in 2034.

The IRS life expectancy factor for age 47 (age in 2025, year 1) is 37.9.

Required 2025 distribution: $400,000 divided by 37.9 = $10,554.

The beneficiary takes nothing. The excise tax applies to the shortfall.

Excise tax: $10,554 multiplied by 25% = $2,639.

That is a $2,639 penalty for year 1 alone. By year 5, assuming 6% account growth, the annual RMD climbs to roughly $17,000. A missed distribution that year costs $4,250 in excise tax. Across all 9 years of missed distributions, total penalties can easily exceed $30,000 on a $400,000 account.

The IRS issued penalty relief for tax years 2021 through 2024. That relief does not extend to 2025 or beyond. Penalties are now fully in effect.

Spousal Beneficiaries: More Options, More Decisions

A surviving spouse has choices that no other beneficiary receives.

Option 1: Treat the IRA as your own. Roll the inherited IRA into your own IRA. Your RMDs begin at age 73. This works best when the surviving spouse is younger than the deceased and wants to defer distributions.

Option 2: Remain a beneficiary. Keep the account as an inherited IRA. RMDs begin based on the later of the year the deceased would have turned 73 or the year of death. This works best when the surviving spouse is older than 59.5 and needs income before age 73 without a 10% early withdrawal penalty.

Option 3: The new spousal election under SECURE 2.0. Starting in 2024, a surviving spouse can elect to calculate RMDs as if they were the deceased spouse. This allows the surviving spouse to use the deceased's remaining life expectancy, which may be shorter or longer depending on ages. This is a one-time, irrevocable election and requires careful modeling before execution.

Trust Beneficiaries: Qualified vs. Non-Qualified

When a trust is named beneficiary, the rules depend on whether the trust qualifies as a see-through trust.

A see-through trust must meet four conditions: it is valid under state law, it is irrevocable or becomes irrevocable at death, the beneficiaries are identifiable, and trust documentation is provided to the IRA custodian by October 31 of the year following death.

A conduit trust passes all distributions directly to the trust beneficiaries. The RMD calculation uses the oldest trust beneficiary's life expectancy.

An accumulation trust may retain distributions within the trust. The IRS applies stricter rules to accumulation trusts and, in some cases, requires the 10-year rule to apply using the oldest beneficiary's factors.

Trustees and estate attorneys should review trust language against the 2024 final regulations before the first distribution deadline.

Four Mistakes That Cost Beneficiaries Real Money

1. Using the wrong table. Beneficiaries use Table I. IRA owners use Table III (Uniform Lifetime Table). Using Table III as a beneficiary produces a longer factor and a smaller distribution, creating an automatic shortfall.

2. Missing the first-year deadline. The first RMD from an inherited IRA is due December 31 of the year following the owner's death. Unlike the original owner's first RMD, there is no April 1 extension for inherited accounts.

3. Failing to reset the factor correctly. Some custodians recalculate from scratch each year. The correct method under IRS rules is to establish the initial factor in year 1 and reduce it by exactly 1 each year. A recalculated factor may produce a different number.

4. Assuming penalty relief continues. The IRS waived excise taxes for missed inherited IRA RMDs from 2021 through 2024. Many beneficiaries built plans around that relief. It no longer applies.

How to Build a 10-Year Distribution Strategy

The 10-year rule is not purely a compliance exercise. It is a 10-year income tax planning window.

Consider your projected income in each of the 10 years. If year 3 is a low-income year, pulling a larger distribution then may cost 12 cents on the dollar rather than 22 or 32. If year 7 includes a large capital gain from a property sale, taking a smaller IRA distribution limits bracket stacking.

The annual RMD is a floor, not a ceiling. You can always take more. Matching distributions to your lowest-bracket years reduces total tax cost across the window.

Run the numbers for each year before December 31 of year 1. A 10-year projection with account growth assumptions, distribution amounts, and marginal rate estimates gives you a defensible plan instead of a reactive one.

Calculate Your Inherited IRA RMD Now

The factors, balances, and tax implications change every year. A static estimate made at the time of inheritance is outdated by the second distribution.

The CalcMoney Retirement Calculator lets you input your account balance, your age, the original owner's age at death, and your distribution year to produce an accurate RMD figure. You can model multiple years at once and adjust the growth rate assumption to match your investment mix.

Run the calculation before December 31. The penalty for missing an annual RMD is 25% of the shortfall. Compliance costs nothing. The calculator is free. Use it now.

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