The Moment
You inherited a Roth IRA from a parent, relative, or someone who named you as beneficiary.
An inherited Roth IRA is one of the most valuable assets you can receive. Unlike a traditional IRA, distributions from a Roth are tax-free — the original owner already paid taxes on the contributions. Your job is to maximize the tax-free growth window.
The Rules
The 10-year rule (SECURE Act): If you are a non-spouse beneficiary and the original owner died after 2019, you must withdraw the entire balance within 10 years. There are no required annual distributions during those 10 years — you choose when and how much to take.
Spouse beneficiaries: You have more options. You can treat it as your own Roth IRA (no 10-year deadline), roll it into your existing Roth, or remain as beneficiary with different distribution rules.
Exceptions to the 10-year rule: Minor children (until age of majority), disabled or chronically ill beneficiaries, and beneficiaries not more than 10 years younger than the deceased can use the stretch IRA (life expectancy distributions).
The Optimal Strategy
For most non-spouse beneficiaries: Wait until year 10.
Since Roth distributions are tax-free and there are no required annual distributions, the mathematically optimal strategy is to withdraw nothing for 9 years and take the full balance in year 10. This maximizes tax-free compounding.
A $100,000 inherited Roth IRA growing at 7% for 10 years becomes roughly $197,000 — all tax-free. If you withdrew $10,000 per year instead, you would receive the same $100,000 but miss out on roughly $97,000 in tax-free growth.
The exception: If you need the money now for a genuine financial need (high-interest debt, emergency, home down payment), taking an early distribution is still tax-free. You lose future growth but pay no penalty or tax.
Run Your Numbers
Enter the inherited IRA value to see growth projections.
Inherited IRA Allocator
Same 10-year rule. Distributions are taxable as ordinary income; spread them across years to manage bracket exposure.
Educational illustration — not financial advice. Math: @/lib/finance/allocation.ts. Allocation order follows the canonical waterfall: high-interest debt → emergency reserves → captured match → tax-advantaged room → taxable invest.
What to explore next
- →How should I invest the inherited Roth IRA during the 10-year window?
- →What is the 5-year rule for Roth IRAs?
- →Should I use inherited Roth IRA funds for a home purchase?
Frequently Asked Questions
Do I have to pay taxes on an inherited Roth IRA?
No — as long as the Roth IRA has been open for at least 5 years (the 5-year rule). Since most inherited Roths meet this condition, distributions are completely tax-free. This includes both contributions and earnings.
Can I contribute to the inherited Roth IRA?
No. An inherited IRA is a separate account. You cannot add new contributions to it. You can only take distributions from it.
What happens if I miss the 10-year deadline?
The IRS imposes a 25% penalty on the amount that should have been distributed (reduced to 10% if corrected within 2 years). Set a calendar reminder for year 9 to begin planning your final distribution.