SECURE 2.0 RMD Clarifications: What the IRS Finally Confirmed in 2025

The SECURE Act of 2019 fundamentally changed the rules for inherited IRAs. The follow-on SECURE 2.0 Act, signed in December 2022, made further adjustments. But for several years after these laws took effect, the IRS repeatedly issued notices waiving penalties and delaying enforcement—creating genuine confusion about what the rules actually required.

That period of uncertainty is over. The IRS issued final regulations in July 2024, and 2025 is the year that mandatory annual required minimum distributions from inherited IRAs began carrying real penalties for non-compliance.

The 10-Year Rule and Annual RMDs

The core change from the original SECURE Act replaced the old "stretch IRA" rules with a 10-year rule for most non-spouse beneficiaries who inherit IRAs from owners who died after December 31, 2019. Under the stretch approach, beneficiaries could take small distributions over their own lifetimes. Under the 10-year rule, the entire inherited account must be fully distributed within 10 years of the original owner's death.

The IRS's final regulations clarified a crucial point that was not obvious from the statute itself: if the original IRA owner had already begun taking required minimum distributions before death, beneficiaries subject to the 10-year rule must also take annual RMDs during those 10 years. They cannot simply wait until year ten and take everything out in a lump sum.

This matters enormously for tax planning. Spreading distributions over ten years with required annual withdrawals is fundamentally different from delaying all distributions to the final year.

Who Is Affected

The annual RMD requirement applies to "eligible designated beneficiaries" who are not exempt from the 10-year rule and who inherited from someone who had already started RMDs. Eligible designated beneficiaries include surviving spouses, minor children of the deceased, disabled individuals, chronically ill individuals, and individuals not more than ten years younger than the original owner.

Non-eligible designated beneficiaries—which includes most adult children, siblings, and other family members—are subject to the 10-year rule but may or may not face the annual RMD requirement depending on the specific circumstances of the inheritance and when the original owner died.

Surviving spouses retain more flexibility than other beneficiaries. They can elect to treat an inherited IRA as their own, roll it over to their own IRA, or keep it as an inherited IRA with different distribution rules.

The Waiver Years Are Over

From 2021 through 2024, the IRS issued a series of notices waiving the penalty for beneficiaries who failed to take annual RMDs from inherited IRAs. Many beneficiaries—and even some advisors—interpreted this as a signal that the annual requirement didn't apply. It was not. The waivers were explicitly temporary, and the IRS was clear that it would eventually enforce the rules once the regulations were finalized.

Starting in 2025, failing to take required annual distributions from an inherited IRA triggers a 25 percent excise tax on the amount that should have been withdrawn. This can be reduced to 10 percent if the distribution is taken and the correction is made within two years.

What Beneficiaries Need to Do Now

If you inherited an IRA after December 31, 2019, the first step is determining whether you are subject to the 10-year rule, whether annual RMDs apply to you, and how much you are required to withdraw in 2025.

The amount you must withdraw is calculated using the IRS's uniform lifetime table and the value of the inherited account at the end of the previous year. Getting this calculation right matters—both for compliance and for minimizing income taxes. Larger distributions push income into higher brackets. Spreading distributions thoughtfully across the 10-year window can significantly reduce the total tax owed.

If you are not sure where you stand, consulting with a tax professional or financial advisor familiar with inherited IRA rules is strongly advisable before year-end.