Inherited Retirement Account Calculator: SECURE Act Distribution Rules
Use this guide to understand the assumptions, inputs, results, and next steps behind the calculator.
Leaving a retirement account to your heirs is one of the most common ways to pass on wealth, but the IRS dictates exactly how and when that money must be withdrawn. Under the SECURE Act and SECURE 2.0, the rules for inheriting a 401(k) or IRA have become significantly stricter, forcing most non-spouse heirs to empty the account within a decade.
This calculator projects how much of your retirement balance your beneficiaries will actually keep after taxes, inflation, and mandatory distribution timelines. By testing different beneficiary types and account structures, you can build a more efficient legacy and inheritance goal and avoid leaving your heirs with a massive, compressed tax burden.
2026 Beneficiary Distribution Rules and Timelines
The timeline your beneficiary has to empty the inherited account depends entirely on their relationship to you. The IRS categorizes heirs into four distinct groups, each with its own mandatory distribution period.
| Beneficiary Category | Who Qualifies | Mandatory Distribution Rule |
|---|---|---|
| Spouse | Legally married spouse | Spousal Rollover: Can treat the account as their own, deferring withdrawals until their own RMD age (73 in 2026). |
| Eligible Designated Beneficiary (EDB) | Minor children, disabled/chronically ill individuals, or someone <10 years younger than you | Stretch / 10-Year: May stretch distributions over their life expectancy, or default to the 10-year rule depending on specifics. |
| Non-Eligible Designated Beneficiary (NEDB) | Adult children, grandchildren, siblings, friends | 10-Year Rule: The entire account must be emptied by December 31 of the 10th year following your death. |
| Non-Person Entity | Your estate, charities, or standard non-see-through trusts | 5-Year Rule: The entire account must be emptied by December 31 of the 5th year following your death. |
Understanding these categories is critical. If you name an adult child as your beneficiary, they cannot stretch the tax deferral over their lifetime like they could prior to 2020. They are subject to the 10-year rule, which can easily push them into a higher tax bracket during their peak earning years.
How Pre-Tax vs. Roth Inheritance Impacts Your Heirs
The type of account you leave behind—Traditional (pre-tax) or Roth (after-tax)—dramatically changes the financial reality for your beneficiaries. When you combine the SECURE Act's 10-year rule with pre-tax accounts, the tax drag can consume a massive percentage of the inheritance.
The Pre-Tax Penalty for Heirs
If you leave a traditional IRA or 401(k) to an adult child, every dollar they withdraw is taxed as ordinary income at their current marginal tax rate.
Because they must empty the account within 10 years, they are forced to take large distributions. If your heir is in their 40s or 50s, they are likely already in their highest earning years. Adding $50,000 to $100,000 of inherited IRA income on top of their salary can push them into the 32% or 35% tax brackets. To see how these withdrawals are taxed, review how 401(k) withdrawals are taxed in retirement.
The Roth Advantage
Roth accounts are also subject to the 10-year rule for non-spouse beneficiaries. However, because the taxes were paid upfront, all distributions are completely tax-free.
An heir inheriting a Roth IRA can leave the money invested for the full 10 years, allowing it to compound tax-free, and withdraw the entire lump sum in year 10 without paying a single cent to the IRS. For those with large pre-tax balances, utilizing a mega backdoor Roth strategy or executing strategic Roth conversions during your lifetime can be the ultimate gift to your heirs.
| Feature | Traditional (Pre-Tax) Inheritance | Roth (After-Tax) Inheritance |
|---|---|---|
| Tax on Distributions | Taxed as ordinary income | 100% Tax-Free |
| Impact on Heir's Taxes | Can push heir into a higher tax bracket | No impact on heir's tax bracket |
| 10-Year Rule Strategy | Spread withdrawals to manage tax brackets | Defer withdrawals to Year 10 for max growth |
| Best For | Heirs in very low tax brackets | Heirs in peak earning years |
The Math Behind Beneficiary Distributions
This calculator models the future value of your account and estimates the annual distributions your beneficiary must take based on their IRS classification. To provide a clear average, the calculator projects the total growth over the mandatory distribution period and divides it into equal annual payouts.
Here is the math powering the projections:
1. Spousal Rollover Growth
If a spouse inherits the account, they can defer withdrawals until their own retirement. The calculator projects the future value of the account at the spouse's retirement age.
Spousal Inherited Value = Initial Account Balance × (1 + Annual Growth Rate) ^ Years Until Spouse Retirement
Where:
- Initial Account Balance = The total value of the retirement account at the time of your death.
- Annual Growth Rate = The expected yearly investment return.
- Years Until Spouse Retirement = The difference between your spouse's current age and their planned retirement age.
2. The 10-Year and 5-Year Rule Distributions
For non-spouse beneficiaries, the calculator estimates the total potential value of the account over the 10-year (or 5-year) period, then calculates an average annual distribution.
Total Future Value = Initial Account Balance × (1 + Annual Growth Rate) ^ Distribution Period
Gross Annual Distribution = Total Future Value / Distribution Period
Where:
- Distribution Period = 10 years for designated beneficiaries (adult children) or 5 years for non-person entities (estates/trusts).
- Total Future Value = The simplified projected value if the account grew untouched for the full period.
- Gross Annual Distribution = The equal yearly withdrawal required to empty the projected balance.
3. Tax and Inflation Adjustments
To show what your beneficiary actually keeps in today's purchasing power, the calculator deducts taxes (for pre-tax accounts) and adjusts for inflation.
Taxes Paid = Gross Annual Distribution × Beneficiary Marginal Tax Rate
Net Real Distribution = (Gross Annual Distribution - Taxes Paid) / (1 + Inflation Rate) ^ Year
Where:
- Beneficiary Marginal Tax Rate = Your heir's combined federal and state income tax rate.
- Inflation Rate = The annual loss of purchasing power over time.
- Year = The specific year of the distribution (1 through 10).
Who Qualifies as an Eligible Designated Beneficiary (EDB)?
While most non-spouse heirs are stuck with the 10-year rule, the IRS carved out exceptions for specific vulnerable groups. These individuals are called Eligible Designated Beneficiaries (EDBs), and they generally retain the right to "stretch" distributions over their own life expectancy, which drastically reduces the annual tax burden.
To qualify as an EDB in 2026, the beneficiary must fit one of these precise definitions at the time of your death:
- A Minor Child of the Account Owner: This strictly applies to your direct children. Grandchildren or nieces/nephews do not qualify. Once the child reaches the age of majority (age 21 under SECURE 2.0), the 10-year rule clock starts ticking.
- A Disabled Individual: Must meet the strict IRS definition of disability (unable to engage in substantial gainful activity).
- A Chronically Ill Individual: Must be certified by a licensed healthcare practitioner as meeting the IRS criteria for chronic illness.
- Someone Not More Than 10 Years Younger: This often applies to siblings, unmarried partners, or close friends who are close to your age.
If your beneficiary meets one of these criteria, they have far more flexibility. If they do not, you should plan for the tax impact of the 10-year rule using a tax-efficient retirement withdrawal calculator to see if drawing down your own pre-tax accounts faster makes sense.
Trust as a Beneficiary: The 5-Year Trap
Many retirees assume that naming a trust as the beneficiary of their IRA is the safest way to control the money from beyond the grave. However, under the SECURE Act, this can trigger the worst possible tax scenario: the 5-year rule.
If you name your estate, a charity, or a standard trust as the beneficiary, the IRS considers it a "non-person entity." Because an entity does not have a life expectancy, the account must be entirely liquidated within 5 years.
For a pre-tax account, forcing a massive balance out over just 5 years will likely push the trust (or the trust's beneficiaries) into the highest possible tax bracket. Trust tax brackets are highly compressed—in 2026, trusts hit the maximum 37% federal tax rate at a fraction of the income level that individuals do.
How to avoid this: If you want to use a trust, you must work with an attorney to draft a "See-Through Trust" (either a conduit or accumulation trust). This allows the IRS to look through the trust to the human beneficiaries, granting them the 10-year rule instead of the 5-year rule. If you are considering complex trust structures, use our estate planning attorney cost calculator to budget for proper legal drafting, or explore an irrevocable life insurance trust (ILIT) as an alternative wealth transfer vehicle.
Frequently Asked Questions
Quick answers to the questions people usually have after running the retirement calculator.
1What is the 10-year rule for inherited IRAs?
The 10-year rule, established by the SECURE Act, requires most non-spouse beneficiaries (like adult children) to completely empty an inherited retirement account by December 31 of the 10th year following the original owner's death. There are no mandatory annual withdrawals for accounts where the owner died before their required beginning date, but the balance must be zero by the end of year 10.
2Are distributions from an inherited IRA taxable?
It depends on the account type. If you inherit a traditional (pre-tax) IRA or 401(k), every dollar withdrawn is taxed as ordinary income at your current marginal tax rate. If you inherit a Roth IRA, the distributions are completely tax-free, provided the account was open for at least five years before the original owner's death.
3Can a spouse keep the inherited account in the deceased's name?
Yes, a surviving spouse has unique flexibility. They can keep the account as an inherited IRA, which allows them to take penalty-free withdrawals before age 59½. Alternatively, they can execute a spousal rollover, moving the funds into their own IRA and deferring required minimum distributions (RMDs) until their own RMD age (73 in 2026).
4What happens if I name my estate as the beneficiary?
Naming your estate as the beneficiary is generally a poor financial decision. The estate is treated as a non-person entity, meaning the retirement account must be fully distributed within five years. Furthermore, the assets will have to go through probate, exposing them to court fees, public record, and creditor claims.
5Does the SECURE 2.0 Act change RMDs for beneficiaries?
Yes. If the original account owner had already reached their RMD age (73) and started taking distributions before they died, the IRS recently clarified that the beneficiary subject to the 10-year rule must also take annual RMDs during years 1 through 9, in addition to emptying the account by year 10.
6How do I minimize taxes for my heirs?
The most effective way to minimize taxes for your heirs is to convert pre-tax traditional IRA funds into a Roth IRA during your lifetime. While you will pay taxes on the conversion now, your heirs will inherit a tax-free account. You should carefully plan what is the best order to withdraw from retirement accounts to ensure you are leaving the most tax-efficient assets to the next generation.
Next Steps for Your Estate Plan
Leaving a retirement account behind requires proactive tax planning, not just filling out a beneficiary designation form. If the calculator shows that your heirs will lose a large portion of their inheritance to taxes, consider adjusting your own withdrawal strategy today.
You can model complex lifetime drawdown scenarios using our advanced retirement calculator, or run scenarios on how to withdraw from retirement accounts tax-efficiently to purposely drain pre-tax accounts while you are in a lower tax bracket. Finally, always ensure your primary and contingent beneficiary forms are up to date and match the rest of your estate planning documents.