How will the 2026 RMD changes alter distribution timelines for beneficiaries of inherited IRAs?
Executive summary
The IRS’s final inherited-IRA regulations change when and how beneficiaries must withdraw after a decedent’s death: many non‑spouse beneficiaries who previously could “stretch” lifetime RMDs now must fully distribute the account within ten years and, for many, begin taking annual RMDs beginning in 2025 or under the delayed applicability date, 2026 [1] [2]. Where annual RMDs apply, those distributions in years 1–9 are calculated using either the beneficiary’s life‑expectancy or the decedent’s remaining life‑expectancy—whichever is longer—and the tenth year requires full liquidation [3] [4].
1. What changed — the rules that compress timelines
Final IRS guidance implements SECURE Act and SECURE 2.0 changes that end the old “stretch” for many non‑spouse beneficiaries: most must now empty inherited IRAs by the end of the tenth year after the owner’s death rather than spread withdrawals over their own lifetimes [3] [1]. The guidance also clarifies that, for beneficiaries required to take annual RMDs during that 10‑year window, annual withdrawals are required in years 1–9 with the remaining balance due by year 10 [3] [4].
2. Timing: when annual RMDs actually start
The IRS initially intended some rules to be effective in 2025 but then delayed final applicability so the new regulations will not apply earlier than the 2026 distribution calendar year, meaning beneficiaries and advisers must track whether 2025 or 2026 rules govern a given account based on IRS announcements and the account owner’s date of death [2]. Several financial firms and commentators note that finalized regulations require some beneficiaries to begin annual RMDs in 2025, but the IRS delay and separate guidance mean beneficiaries must confirm which calendar year’s rules control their situation [4] [1] [2].
3. Who must take annual RMDs and who gets different treatment
Non‑spouse designated beneficiaries are the primary group affected: many of them face annual RMD requirements plus the 10‑year drain [3]. Eligible designated beneficiaries (EDBs)—for example, surviving spouses, minor children (with special age‑limited rules), chronically ill individuals, disabled individuals, and beneficiaries not more than 10 years younger than the decedent—retain greater flexibility and, in many cases, may still “stretch” distributions over life expectancy [3] [5]. Spouses retain options to roll into their own IRA and use their own RMD rules [6].
4. How distribution amounts are calculated under the new regime
When annual RMDs are required during the 10‑year period, the amount in years 1–9 is calculated using life‑expectancy tables: either the beneficiary’s Single Life Table factor or the decedent’s remaining life expectancy—whichever produces the longer payout—so RMDs generally increase each year as the divisor declines by 1.0 annually [7] [3]. Financial firms have produced calculators and examples illustrating the mechanics and year‑by‑year factors beneficiaries will use [8] [9].
5. Tax and penalty consequences that shorten effective timelines
Distributions from inherited traditional IRAs are taxable as ordinary income when withdrawn; Roth inherited IRAs are subject to the same 10‑year rule though they may produce tax‑free distributions if qualified [10] [3]. Missed RMDs face an excise penalty (generally 25% of the amount not taken on time, potentially reduced to 10% in some remediation cases), which incentivizes taking distributions earlier in the 10‑year window rather than delaying until year 10 [3] [10].
6. Practical implications for beneficiaries and estate planning
Beneficiaries who had planned to stretch tax deferral must now adjust: the compressed timeline accelerates taxable income, possibly pushing heirs into higher tax brackets and affecting means‑tested benefits and financial plans [1] [10]. Advisors and custodians are updating processes; many firms warn that beneficiaries subject to the annual rule should take yearly distributions starting in 2025 or 2026 depending on applicability, and consider tax‑management tactics such as Roth conversions by the original owner or partial distributions timed to lower‑income years [4] [10].
7. Areas of uncertainty and next steps for heirs
The IRS’s delay of the final regulations to no earlier than the 2026 distribution calendar year leaves implementation questions for 2025 and earlier deaths; the agency told taxpayers to use a reasonable, good‑faith interpretation for periods before final applicability [2]. Beneficiaries should verify whether they’re treated as subject to annual RMDs versus only the 10‑year rule, confirm applicable start years with custodians, and consult tax advisers because available sources stress complexity and differing firm guidance [2] [1] [3].
Limitations: this analysis relies solely on the provided sources and does not incorporate other contemporaneous IRS releases or primary regulatory texts beyond the snippets cited; for the precise application to any account you must consult the full IRS guidance and a tax professional [2] [3].