Tick-tock! Empty that Inherited IRA by year 10 or hit the tax wall.

The clock is ticking, and spoiler alert: the IRS isn’t hitting snooze. Under SECURE Act and SECURE 2.0, most non-spouse Designated Beneficiaries (DBs) must empty their Inherited IRA by the end of the 10th year after the year the IRA owner died.   

Here’s how it works: If the IRA owner died in 2020, 2021 is year 1 and year 10 is 2030. Delay effective Inherited IRA planning, and your clients could slam into a massive tax wall, with fewer options to soften the blow. 

Want to avoid that crash? Let’s bust the biggest myths and show you smarter strategies. 

If you know, you know.

When the final RMD regulations for SECURE Act and SECURE 2.0 dropped, Inherited IRA complexity skyrocketed. Financial pros needed clarity fast, and zero guesswork. Because knowing the rules isn’t optional, it’s profitable.  

That’s why they turned to Financial Cloud Works and our Break Analytics platform, the tool that makes the rules simple, accurate, and client-ready. 

The results speak for themselves: Inherited IRA illustrations surged 145% from 2024 to 2025. Why? Because when rules change, financial professionals need more than answers—they need confidence. And confidence comes from tools that deliver precision, compliance, and planning power with total ease. 

Financial Cloud Works isn’t just software – it’s your competitive edge. 

Separating Inherited IRA Myths from Reality

Myth 1 – RMDs aren’t necessary
Not true for many non-spouse DBs. If the IRA owner died on or after their required beginning date (RBD), required minimum distributions (RMDs) apply. FYI: RBD = April 1 after the year the owner reached RMD age. If the IRA owner died before RBD, then RMDs aren’t necessary, but the 10-year clock still ticks.

Myth 2 – No RMDs, so no worries… If only taxes worked that way!
If it’s a Roth IRA, your clients are fine. If it’s a Traditional IRA, proceed with caution. Why? Whether RMDs apply or not, the account must be emptied by year 10. That means moving before tax money through the tax wall.  

Don’t fail to plan. Your clients can hit it all at once or chip away strategically.  

Hint: the IRS loves the “all at once” approach, and yes, they’ll bring confetti. 

Myth 3 – RMDs are waived for DBs
Starting in 2025, they’re not. Miss an RMD and your client could owe a 25% excise tax. Imagine telling a client:  

“You owe a penalty because I didn’t know the rule changed.”  

Ouch. That’s one surprise party nobody wants. 

Why Strategy Matters

Doing nothing or taking only RMDs often benefits the IRS more than your client. A proactive approach can:

  • Reduce tax bracket creep
  • Preserve wealth
  • Optimize long-term outcomes

Top 3 Strategies for Inherited IRAs:

  1. Do Nothing – Great if your goal is to make the IRS happy.
  2. Take Only RMDs – Minimal planning, limited tax efficiency and the IRS is ecstatic.
  3. Beat the Tax Wall – Apply smart, tax-efficient methods to keep planning stress-free. 
  • Use Distribution Smoothing™, available in Break Analytics, to visualize how strategic distributions minimize taxes and maximize wealth retention. 
  • Meet with your client to discuss upcoming life changes like retirement or income dips, that makes larger distributions tax savvy. 
  • Create a customized distribution schedule that keeps your client in their preferred tax bracket. 

Simplify the Complex. Automate the Rules.

Stop decrypting IRS rules like they’re ancient hieroglyphics. Financial Cloud Works does it for you:

  • Applies SECURE Act and IRS rules automatically
  • Flags when RMDs apply—and when they don’t
  • Models better tax strategies with Distribution Smoothing™
  • Keeps you compliant while delivering better outcomes

Simplify your life. Stop decoding Inherited IRA rules. Let Financial Cloud Works handle the complex—so you can focus on effective Inherited IRA planning.

About the Author: Cathleen Davis-Whitmore is the Chief Marketing Officer at Financial Cloud Works, LLC. With a robust 21-year tenure in the financial industry, she has become an Individual Retirement Account (IRA) subject matter expert, offering unparalleled sales and marketing strategies coupled with technical acumen to a diverse clientele including financial advisors, CPAs, and estate planning attorneys.

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