Here’s something most people don’t know until they’re sitting across from a financial planner after losing a parent: an inherited Roth IRA and an inherited traditional IRA are governed by almost completely different rules. The tax treatment, the distribution requirements, and the strategic decisions involved are night-and-day different — and the Roth version is significantly more forgiving.
That’s the good news. The complicated news is that even the Roth version has rules, and the rules changed meaningfully in recent years. If you’ve just inherited a Roth IRA from a parent or another family member, here’s what you actually need to know.
I spent 30 years as a Warning Coordination Meteorologist with the National Weather Service. The job is fundamentally about risk: which threats matter, which ones don’t, and what the right response is given incomplete information. Inherited retirement accounts hit the same nerve. People panic about the wrong things, overlook the real decisions, and sometimes make costly mistakes simply because nobody walked them through the mechanics before they had to act. That’s what this article is for.
The Short Answer on Distributions
If you inherited a Roth IRA from a parent, you don’t have to take distributions immediately. The money can continue to grow tax-free inside the inherited account. But at some point — depending on your relationship to the original owner and when the account was opened — you’ll be required to fully empty it. The relevant rule is the 10-year rule, and it applies to most non-spouse beneficiaries who inherited after a specific date.
Under the SECURE Act, most non-spouse beneficiaries (including adult children inheriting from a parent) must withdraw all funds from the inherited Roth IRA within 10 years of the original owner’s death. No annual required minimum distributions are mandated during that window — meaning you could leave it untouched for nine years and then take it all in year ten. But the account must be empty by the end of the 10th year.
The critical word there is "most." There are exceptions — called Eligible Designated Beneficiaries — who get better treatment:
- The surviving spouse of the original owner
- A minor child of the original owner (not a grandchild — the child of the deceased)
- A person who is chronically ill or disabled
- Someone no more than 10 years younger than the original owner
If you’re an adult child who is not disabled, not chronically ill, and more than 10 years younger than your parent (which is almost always the case), you’re a "non-eligible designated beneficiary" under the rules. The 10-year window applies to you.
Are Distributions From an Inherited Roth IRA Taxable?
This is the question people ask most. And the answer is almost always: no, they’re not taxable — with one meaningful exception.
Roth IRA contributions are made with after-tax dollars. The original owner paid taxes on that money before it went in. The IRS isn’t going to tax it again when it comes out. Qualified distributions from a Roth IRA — including distributions from an inherited Roth IRA — are tax-free.
The one-exception wrinkle: the five-year rule. To take tax-free distributions from a Roth IRA, the account must have been open for at least five years. This is measured from January 1 of the year the original owner first contributed to any Roth IRA — not just the one you inherited. If your parent opened their first Roth IRA in, say, year one and it’s now been more than five years since then, you’re in the clear. The distributions are tax-free.
But if your parent had only recently opened the Roth IRA — within the last five years before their death — the earnings inside that account (not the contributions, but the growth) could be taxable when you withdraw them. The contributions themselves are always returned to you tax-free. Only the earnings are at risk during that early window.
In practice: if your parent had a Roth IRA for more than five years before they died, which is the case for most people with any meaningful Roth balance, everything comes out tax-free. This is one of the most powerful aspects of inheriting a Roth rather than a traditional account.
How This Compares to Inheriting a Traditional IRA
The contrast here is significant. The 10-year rule that applies to inherited traditional IRAs carries the same timeline — but every dollar you pull out of an inherited traditional IRA is taxable as ordinary income in the year you take it. If you inherit $180,000 in a traditional IRA and withdraw it all in one year, that entire amount gets added to your taxable income. It can push you into a significantly higher bracket.
With an inherited Roth IRA, that problem essentially doesn’t exist. You can take $60,000 in year one, $60,000 in year five, and $60,000 in year ten, and none of it adds to your taxable income (assuming the five-year rule is met). Or you can leave it for nine years, let it compound tax-free, and take the whole thing in year ten with no tax owed. That flexibility has real value.
Compare this to the step-up in basis rule that applies to inherited stocks and brokerage accounts — where the tax treatment depends on when you sell, what the asset has done since you inherited it, and what your capital gains situation looks like. The inherited Roth is uniquely clean: almost no decisions to optimize around taxes, because taxes simply aren’t part of the equation.
The Strategic Decisions That Actually Matter
Since distributions from an inherited Roth IRA are tax-free, the primary decision becomes: when do I take the money out, and does it matter?
Here’s my take: if you don’t need the money, leave it. Every year the account stays invested, it’s growing tax-free. A $150,000 inherited Roth IRA left to grow at an average annual return of 7% for 10 years becomes approximately $295,000 — and all of that growth comes out tax-free when you take it in year ten. The longer you wait (up to the 10-year limit), the larger the tax-free sum you receive.
The only reason to pull money out earlier is if you actually need it or if you have a strategic reason — like offsetting a low-income year where taking some now saves nothing on taxes but gets the money working for you in a taxable account. Since the Roth distributions aren’t taxable, there’s no tax reason to pull early. The math almost always favors waiting.
One nuance: the 10-year rule requires the account be empty by December 31 of the 10th year after the original owner’s death. Not the 10th anniversary to the day — the end of the 10th calendar year. If your parent died in March, your 10-year clock runs out at the end of December ten years later. Don’t leave it until year 11. The IRS imposes a 25% penalty on amounts that should have been distributed but weren’t — the same penalty structure that applies to missed required minimum distributions from other retirement accounts.
What to Do With the Inherited Account — Practically
There are a few things to handle when you first inherit the account:
Title it correctly. An inherited Roth IRA must be titled as an inherited (or "beneficiary") IRA. You cannot roll it into your own Roth IRA — that’s reserved for surviving spouses. The account will typically be titled something like "[Parent’s Name], deceased, FBO [Your Name], Beneficiary Roth IRA." If the institution tries to roll it into your personal Roth or requires you to take a lump sum immediately, push back or find another custodian.
You can move it. If you inherit a Roth IRA at a financial institution you don’t use or don’t like, you can do a trustee-to-trustee transfer to move it to a custodian of your choice — Fidelity, Vanguard, Schwab, or whichever you prefer. This is not a rollover; it’s a direct transfer, and it doesn’t trigger any taxes or penalties. You have to maintain it as an inherited IRA, but you can choose where it lives.
Keep investing it. Many people inherit an account and immediately think they need to liquidate it. You don’t. You can keep the inherited Roth invested in whatever funds or assets were inside it, or you can change the investments to something you prefer. The goal is to keep it growing for as long as the rules allow before you’re required to empty it.
Check the five-year rule status. Ask the financial institution when the original owner first opened a Roth IRA. If it was more than five years ago, you’re in the clear and all distributions are tax-free. If it’s been fewer than five years, only earnings (not contributions) on the recently-opened account might be taxable — and the custodian should be able to tell you what portion of the account represents contributions vs. growth.
The One Scenario That Changes Everything
Spouse beneficiaries. Different rules. Completely.
If you inherited a Roth IRA from your spouse rather than a parent, you have options that no other beneficiary has. You can roll the inherited Roth IRA into your own Roth IRA as if it were always yours. The 10-year rule doesn’t apply. Required minimum distributions don’t apply during your lifetime (Roth IRAs don’t have them for the original owner). The account is simply yours now, and it follows all the rules of your own Roth IRA going forward.
This is a significant advantage that surviving spouses often don’t know about or don’t claim. If you’re a surviving spouse and the institution handling the inherited Roth hasn’t offered you this option, ask specifically about treating it as your own account.
A Few Notes on Rules That May Have Changed
The SECURE Act and SECURE 2.0 Act both made significant changes to inherited IRA rules in recent years, and regulators have continued to issue guidance on exactly how those rules apply in edge cases. Some of the annual RMD questions for non-eligible designated beneficiaries were still being clarified as of the time this was written.
The core rules I’ve outlined — the 10-year rule for adult children, the tax-free nature of qualified Roth distributions, the five-year rule on earnings — are well-established. But rules around inherited accounts change more frequently than most areas of tax law. Before making any significant decisions about timing or distribution strategy, verify the current rules with a tax advisor or the IRS directly. This article gives you the framework; a tax professional gives you the current details.
What to Do Next
If you’ve recently inherited a Roth IRA, start by contacting the financial institution holding the account. Confirm the account can be retitled as an inherited Roth IRA in your name, ask about the five-year rule status for this account, and ask whether you have investment options beyond what’s currently in the account.
Then open a free account at your state’s financial regulator or FINRA’s BrokerCheck to verify your custodian’s credentials if you’re using an institution you’re unfamiliar with — that takes five minutes and costs nothing.
If you’re thinking about opening your own Roth IRA alongside the inherited one, check the Roth IRA income limits if you want to open or contribute to your own Roth account — inheriting a Roth doesn’t affect your eligibility to contribute to your own, and if your income allows it, starting or continuing contributions to a personal Roth makes sense in parallel with managing the inherited one.
For a deeper understanding of the inherited IRA rules and how they interact with estate planning and tax strategy, Ed Slott’s retirement savings guides are the most cited resource in this space — Slott has spent decades specifically on IRA rules for beneficiaries and writes in terms regular people can follow. And if you’re doing any broader estate planning after a parent’s death, Suze Orman’s estate planning guides cover wills, trusts, and beneficiary designations in one place — the things your parent may or may not have had in order that you’ll want to get right yourself.
The inherited Roth IRA is one of the cleanest financial inheritances you can receive. The rules aren’t complicated once you understand them, and the tax outcome — nothing owed — is genuinely rare in the world of inherited assets. Understand the 10-year window, leave the money invested for as long as you can, and don’t miss the deadline. That’s really most of what you need to know.