You’ve Inherited a Roth IRA: A Simple Guide to the 2025 Rules

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An inherited Roth IRA is a retirement account you receive after someone passes away. The rules regarding an inherited Roth IRA are different from a regular Roth IRA. Withdrawing money has different implications depending on your relationship with the owner. 

Legislation in 2025 has changed the rules on withdrawals. For the nonspouse beneficiaries, the 10-year rule applies. Beneficiaries often have to take withdrawals from one to nine years, in addition to emptying the account in year 10. Failure to do so could lead to tax penalties. Find out more about the rules on inheriting a Roth IRA. 

Inherited Roth IRA Distribution Rules Explained 

The 10-Year Deadline

For nonspouse beneficiaries, the main distribution rule is that the funds in the inherited account must be completely withdrawn by the end of the 10th year after the owner’s death. 

2025 IRS Rule

Since January 2025, the IRS has a new rule regarding distributions. If the original owner took yearly required withdrawals prior to their death, the beneficiary may have to take withdrawals in years one to nine. Waiting until the 10th year to take required withdrawals after the original owner’s death may not be an option for beneficiaries.  

The IRS will likely strictly enforce this rule in 2025.

Spreading Withdrawals over Your Lifetime 

Certain beneficiaries can take small withdrawals over their lifetime. This option allows funds to grow. However, it’s only available to eligible designated beneficiaries.

This designation includes the following:

1. Surviving spouses
2. Disabled or chronically ill individuals
3. Minor children of account holders
4. Beneficiaries less than 10 years younger than the original owner. 

The Five-Year Deadline

Inherited Roth IRA guidelines include a five-year deadline rule. This rule requires the beneficiary to withdraw the full amount by the end of the fifth year, after the original owner’s death. This rule requires the beneficiary to be a trust, estate or charity or when the original Roth IRA holder died before the five-year aging requirement was met.

Inherited Roth IRA Beneficiary Rules 

The guidelines on inherited Roth IRA beneficiary rules depend on your relationship with the person who passed away. Here are the four types of relationships: 

1. The Surviving Spouse

• You were legally married to the account owner.
• As a surviving spouse, you have the best options. These options include
  • Treat the account as your own and delay withdrawals
  • Roll the funds into your own IRA
  • Remain a beneficiary. 
• Surviving spouses have the freedom to benefit from tax-free growth. 

2. Eligible Designated Beneficiaries (EDBs)

• EDBs refer to nonspouse beneficiaries that include:
  • A minor child of the deceased
  • A disabled or chronically ill person
  • Someone not more than 10 years younger than the person who passed.
• You can take lifetime withdrawals and stretch out the benefits of the IRA. 
• This group has better options than most other relatives who aren’t beneficiaries in the next category. 

3. Designated Beneficiaries 

• Designated beneficiaries include adult children, grandchildren, siblings or friends. 
• You must follow the 10-year rule, which means that the entire account must be emptied by the end of year 10. 
• Starting in 2025, designated beneficiaries may have to take annual RMDs in years one through nine if the original owner was already taking RMDs. 

4. Non-Designated Beneficiaries

• A nondesignated beneficiary is an entity to an estate, charity or certain types of trusts. 
• This is the least flexible option. 
• Beneficiaries must follow the five-year rule. The beneficiary must empty the account by the end of the fifth year, after the original owner’s death. 

Choosing What to Do with Your Inherited Roth IRA 

If You’re the Surviving Spouse 

You can either roll it in your own Roth IRA or keep it as a separate inherited account. 

1. Make it your own Roth IRA.. You can roll the money into your own Roth IRA. This is often the best choice because the money can keep growing tax-free, and you won’t have to take money out until you retire. 
2. Keep it as a separate “inherited” account. This allows you to take money out anytime without penalty, which is useful if you’re under 59 ½. 

Here’s a comparison: 

If You’re an ‘Eligible Designated Beneficiary’ (EDB)

You have access to the lifetime stretch option over your entire lifespan. This means you can take small payments over several years. This allows you to maximize tax-free growth. 

• For minor children: You can use the “stretch” method until you turn 21. After that, you’ll have 10 years to empty the rest of the account. 

You’re a ‘Designated Beneficiary’

This applies to most nonspouses. Designated beneficiaries must follow the 10-year deadline. 

A Smart Strategy

You don’t have to wait until the last minute. You can take money out over the 10 years to suit your financial needs.

Tax Rules for Inherited Roth IRA Withdrawals 

How do tax rules work with inherited Roth IRA withdrawals? For most beneficiaries, withdrawals from an inherited Roth IRA are usually 100% tax-free. There is one exception — and that’s the Five-Year Rule.

The Critical Five-Year Rule for Tax-Free Earning

This is the most important tax rule to know. 

• Tax-free earnings: The original owner must have opened their first Roth IRA at least five years ago.

Roth IRA Withdrawals: A Quick Example

Your mom opened her first Roth IRA four years ago and left it to you. You can take all the money she contributed tax-free right away. If you take out the investment earnings, you’ll owe income tax for the next year until the account hits the five-year mark. 

Common Inherited Roth IRA Mistakes to Avoid 

Here are common mistakes to avoid with inherited Roth IRAs:

1. Skipping required withdrawals: If you’re required to take an RMD and miss doing so, you may pay hefty IRS penalties. 
2. Adding your own funds: You’re not allowed to add new funds to your inherited Roth IRA. 
3. Not understanding the 10-year deadline: Many don’t understand there are deadlines that apply to a Roth IRA. Non-spouse beneficiaries must withdraw all funds in the account within 10 years. 
4. Forgetting to take the original owner’s final withdrawal: If the original owner was required to take an RMD the year they passed, but failed to do so, you’ll need to take the withdrawal on their behalf. 

What’s Next for Your Inherited Roth IRA?

These rules can be tricky. Talking to a financial advisor or tax pro is always a smart move to make sure you’re making the best choice for you. 

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