Retirement Accounts and the Ten-Year Rule
A beneficiary generally needs to empty the account within ten years.
Picture a couple named Roscoe, 72, and Fay, 70. They have two grown children. Most of what they own sits in retirement accounts they filled over many years.
"The kids get this when we go, right?" Roscoe said.
Fay said, "I read there is a rule about how fast they need to take it out."
They found the Internal Revenue Service page on required distributions. This is what it says about accounts of people who die after 31 December 2019. A beneficiary generally needs to empty the account within ten years. That is the ten-year rule.
Some people are treated differently. The IRS calls them eligible designated beneficiaries.
| Who may be treated differently | How they are described |
|---|---|
| Surviving spouse | Listed as an exception |
| Minor child of the owner | Listed as an exception |
| Person who is disabled or chronically ill | Listed as an exception |
| Person not more than ten years younger than the owner | Listed as an exception |
Roscoe and Fay's children are adults and are much younger. They could fall under the ten-year rule, and an accountant could confirm.
There is one more detail. In July 2024, final regulations were reported to say that yearly withdrawals can be required during the ten years in some cases. The case is when the owner died on or after the date their own required withdrawals began. This is a reported detail from a secondary source, so it is one to confirm with an accountant.
The IRS also says a Roth account has no required withdrawals for the owner in life. The beneficiaries are still subject to the rules after the owner dies.
How traditional and Roth accounts differ in the income tax the children would pay is a question for an accountant.
"So there is a ten-year window," Fay said.
"And we have not asked how it would run for ours," Roscoe said.
You could…
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Check who is named as beneficiary on each account, and write it down.
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Ask an accountant who works with Americans abroad how the ten years would run for your accounts.
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Tell your children the accounts exist and where the statements are kept.
What did you learn when you asked about your accounts? Share it here. Someone reading may have a clock they have not looked at.
Figures are estimates for planning, based on public data. Sources: Internal Revenue Service, Retirement Plan and IRA Required Minimum Distributions FAQs; IRAhelp.com report on the July 2024 final regulations.
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