I Inherited a Stock Portfolio. What Should I Check First?
An inherited portfolio arrives with someone else’s choices, tax history and risks. Here is what to check first, in order, and why there is rarely a reason to rush.
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Inherited IRA 10‑Year Rule: What It Means and How to Invest
If you inherited an IRA from a parent or anyone other than a spouse, you probably have ten years to empty it, and possibly a withdrawal every year too. Here are the rules from the IRS, and how to match the investments to the withdrawal schedule.
Key takeaways
- Most non-spouse beneficiaries of an IRA owner who died in 2020 or later must empty the account by December 31 of the 10th year after the death. If the owner died in 2025, the deadline is December 31, 2035 (IRS Publication 590-B).
- If the owner had already started required withdrawals, you must also take a withdrawal every year in years 1–9, under final IRS rules that apply from 2025.
- Spouses, minor children of the owner, disabled or chronically ill people, and beneficiaries not more than 10 years younger than the owner have other options.
- Invest each slice of the account for when it will be withdrawn: money needed in the next few years should not depend on the stock market.
- A missed required withdrawal can cost a 25% excise tax, reduced to 10% if corrected in time.
What is your own portfolio exposed to? Check it with Exent →
In this article
- What is the 10-year rule for an inherited IRA?
- Who has to follow the 10-year rule, and who doesn’t?
- Do I have to take money out every year, or only by year 10?
- How should I invest an inherited IRA during the 10 years?
- Should I spread withdrawals out or wait until year 10?
- What should I do first after inheriting an IRA?
What is the 10-year rule for an inherited IRA?
The 10-year rule says most beneficiaries must withdraw the entire inherited IRA by December 31 of the year that contains the 10th anniversary of the owner’s death. It came in with the SECURE Act and applies when the owner died after December 31, 2019. Before that, most beneficiaries could stretch withdrawals over their own life expectancy.
The IRS’s Publication 590-B gives the example: if the owner died in 2025, the beneficiary must fully distribute the IRA by December 31, 2035. Withdrawals from a traditional IRA are generally taxed as ordinary income in the year you take them.
Who has to follow the 10-year rule, and who doesn’t?
Adult children and most other individual beneficiaries follow it. Publication 590-B lists five kinds of “eligible designated beneficiaries” who can instead take withdrawals over their life expectancy:
| Beneficiary | Rule (summary) |
|---|---|
| Surviving spouse | Can treat the IRA as their own, roll it into their own IRA, or remain a beneficiary |
| Minor child of the owner | Life-expectancy withdrawals until the age of majority, then the 10-year rule |
| Disabled individual | Life-expectancy withdrawals |
| Chronically ill individual | Life-expectancy withdrawals |
| Not more than 10 years younger than the owner | Life-expectancy withdrawals |
| Adult child, grandchild, other individual | 10-year rule |
| Estate, charity, some trusts | Separate rules; see Publication 590-B |
Summary only. A non-spouse beneficiary cannot roll an inherited IRA into their own IRA. The money can move between firms only by a direct trustee-to-trustee transfer into an inherited IRA kept in the deceased owner’s name for your benefit. A check made out to you counts as a withdrawal.
Do I have to take money out every year, or only by year 10?
It depends on whether the original owner had already started required minimum distributions (RMDs) when they died.
| When the owner died | Years 1–9 | Year 10 |
|---|---|---|
| Before their required beginning date (had not started RMDs) | No withdrawal required; you may withdraw any amount | Empty the account |
| On or after their required beginning date (was taking RMDs) | A minimum withdrawal each year, based on life expectancy | Empty the account |
The yearly requirement was confirmed in final regulations (T.D. 10001) published in July 2024. Because the rule was unclear for several years, the IRS waived the penalty for missed yearly withdrawals of this kind for 2021 through 2024 in a series of notices, the last being Notice 2024-35. The final rules apply from 2025. The waiver did not extend the 10-year deadline.
Under current law, owners generally start RMDs at age 73, according to the IRS RMD FAQs. A missed RMD may carry a 25% excise tax, cut to 10% if corrected within two years. Inherited Roth IRAs follow the distribution deadlines too, though withdrawals may be tax-free; Publication 590-B covers the details. Rules in this area have changed several times since 2019, so confirm the current year’s rules on IRS.gov or with a tax professional.
How should I invest an inherited IRA during the 10 years?
Match each part of the account to the year it will come out. Money you will withdraw in the next two or three years has little time to recover from a fall; money for years 8–10 has more. Illustrative only, for a $600,000 inherited IRA withdrawn in roughly equal amounts:
| Slice (Illustrative) | Amount | Withdrawn in | Typical approach |
|---|---|---|---|
| Near term | $180,000 | Years 1–3 | Cash, Treasury bills or short-term bonds |
| Middle | $240,000 | Years 4–7 | A balanced mix of stocks and bonds |
| Late | $180,000 | Years 8–10 | Can carry more stock exposure |
Why it matters: in 2022 the S&P 500 fell 25.4% peak to trough and broad US bonds (AGG) fell 15.9%, while 1–3 month Treasury bills (BIL) gained 1.4% for the year, in Exent’s data. Had the $180,000 near-term slice been all in the S&P 500, a fall like that would have cut it by about $45,600 just before it was needed (Illustrative).
Also check concentration. Inherited IRAs often hold a parent’s long-held stocks, and the 10-year clock forces sales anyway. See single-stock concentration limits and our checklist for an inherited portfolio.
Should I spread withdrawals out or wait until year 10?
One common approach is to spread withdrawals out, because the whole balance is taxable income in the years it comes out. Illustrative: a $600,000 IRA taken as about $60,000 a year adds a moderate amount to each year’s income; left until year 10, it could add $600,000 or more in a single year and push much of it into higher tax brackets. Waiting may still suit someone who expects lower income later, for example after retiring.
This is a tax-planning question that depends on your income, state taxes and other accounts, so it is worth an hour with a tax professional. For the wider tax picture, see tax-efficient portfolio placement.
What should I do first after inheriting an IRA?
- Find out the owner’s date of death and whether they were already taking RMDs. That decides which row of the table applies.
- Ask the custodian whether the owner’s RMD for the year of death was taken.
- Open an inherited IRA and move the money by direct transfer, not by check.
- Write down your deadline year and a draft withdrawal schedule.
- List what the account holds and set aside the near-term slice before changing anything else.
If you are a surviving spouse, the choices are different and often more flexible; see also our guide for those taking over from a spouse who handled the money.
How to check an inherited IRA’s holdings with Exent
- Upload a screenshot or statement of the inherited IRA (CSV, Excel, PDF or Google Sheet); no brokerage login. Keep it as its own portfolio next to your other accounts.
- Exent replays the holdings through 2008, 2020 and 2022 and shows concentration, so you can see how much of the next few years’ withdrawals sits in volatile positions.
- Test a different mix for the near-term slice in the what‑if simulator before you trade.
Frequently asked questions
In most cases, yes, if he died in 2020 or later and you are not an eligible designated beneficiary. The deadline is December 31 of the year containing the 10th anniversary of his death.
Under the 10-year rule, yes if the original owner had already started required distributions, under final IRS rules that apply from 2025. If the owner died before starting them, no yearly withdrawal is required before year 10.
The IRS excise tax on a missed required distribution is 25%, reduced to 10% if it is corrected within two years. The IRS waived it for certain missed inherited IRA withdrawals from 2021 through 2024.
Only a surviving spouse can. Other beneficiaries must keep it as an inherited IRA and can move it between firms only by a direct trustee-to-trustee transfer.
One approach is to match each slice to its withdrawal year: lower-risk holdings for money needed soon and more stock exposure for money withdrawn near the end.
No. A surviving spouse is an eligible designated beneficiary and can treat the IRA as their own, roll it over, or remain a beneficiary with other withdrawal options.
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Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.