The Complete IRA Guide for Pre-Retirees (2026): Contributions, Roth Conversions & RMDs

Most people think they understand IRAs. They know the basic idea — you put money in, it grows, you take it out in retirement and pay taxes on it (or you don’t, if it’s a Roth). That’s enough to get started. It’s not enough to avoid the mistakes. Those show up later, often at tax time, and can be expensive.

To help you avoid those costly mistakes and arm you with information to grow your retirement nest egg, I put together this complete reference for pre-retirees on IRA rules. Keep reading to learn about IRA eligibility, contributions, tax deductibility, Roth conversions, required minimum distributions, rollovers, inherited IRA rules that changed under the SECURE Act, and the strategies and traps that come up most often in the decade before retirement.

Bookmark this post. Come back to it. It could save you thousands.

Here’s everything you need to turn a simple account into a wealth-building machine.

What is an IRA?

Individual Retirement Arrangements are tax-advantaged savings accounts created by the U.S. tax code to make it easier to save for retirement. Two reasons they matter:

Tax-deferred (or tax-free) growth

Money inside an IRA grows tax free until withdrawn in retirement. Dividends, capital gains, interest income – no taxes until you take the money out. Over 20 or 30 years, that compounding gap versus a taxable brokerage account is substantial.

Creditor protection

Under the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, up to $1.5 million of IRA assets per taxpayer is protected from creditors in bankruptcy (adjusted periodically for inflation). Rollover IRAs — money that came from a qualified retirement plan like a 401(k) — have unlimited creditor protection in bankruptcy, the same as the original plan.

Getting Started with IRAs

Ask yourself two key questions:

Are you eligible to contribute to an IRA?
Will the contribution be tax-deductible?

Eligibility: Who Can Contribute

Any individual with earned income can contribute to an IRA, regardless of age. If one spouse has no earned income but the other does, the non-working spouse can open a spousal IRA (must file a joint tax return).

Counts as earned income: wages, salary, tips, bonuses, fees, self-employment income, and alimony from divorce agreements executed before 2019.

Does not count: rental income, pension or retirement plan distributions, annuity income, Social Security, unemployment compensation, deferred compensation, foreign earned income, and excluded income.

2026 IRA Contribution Limits

$7,500 base limit plus a $1,100 catch-up for those age 50 or older ($8600 max contribution). Limits apply in aggregate across all IRA contributions – traditional and Roth – per taxpayer, for the stated tax year.

You can never contribute more than you actually earned in the year. If your earned income is $5,000, the most you can contribute to traditional and Roth IRAs is $5,000 even though the IRS limit is higher.

For Spousal IRAs, both spouses may contribute up to the yearly IRS limit, as long as total contributions are less than their total household income.

If you over-contribute, the excess contributions are subject to a 6% excise tax that compounds every year the excess stays in the account. The fix is to withdraw the excess (plus earnings attributable to it) before the tax filing deadline.

The Deductibility Question

Traditional IRA contributions are deductible from your taxable income in the year they are made, and you pay income taxes on those funds when withdrawn in retirement. If you don’t deduct the contribution, that means your contribution came from your taxable income (Roth IRA) — you won’t pay taxes when withdrawn as long as you follow the IRS rules (more on Roth IRAs to follow).

Non-deductible contributions create basis. If you contribute after-tax dollars to a traditional IRA, that money is “basis” — already taxed, not subject to tax again on withdrawal. The IRS requires you to track basis on Form 8606, filed every year you make a non-deductible contribution and every year you take a distribution from or convert a traditional IRA. Lose track of basis and you’ll pay tax twice on the same dollars. This is important when it comes to Roth conversions, which we’ll discuss later.

Tax deductibility is a good deal, and retirement plan participants are already getting significant tax advantages. If you or your spouse is an active participant in a workplace retirement plan (401k, pension, etc) and your income exceeds certain thresholds, you may not be able to deduct IRA contributions from taxable income.

2026 phaseouts for traditional IRA deduction (active retirement plan participants):

Single filer covered by a workplace plan: $87,000–$97,000 modified adjusted gross income
Married filing jointly, the contributing spouse is covered: $139,000–$159,000 modified AGI
Married filing jointly, the non-contributing spouse is covered: $236,000–$246,000 modified AGI
Married filing separately and covered: $0–$10,000 (does not adjust)

If neither you nor your spouse is covered by a workplace plan, your traditional IRA contribution should be deductible – as long as you meet the eligibility rules above.

If your income places you in the phaseout range, you can still make a partial deduction. Above the top of the range, you can still make a non-deductible contribution — which you need to track with IRS form 8606 when you file taxes.

Traditional IRAs

Contributions usually go in pre-tax, investments grow tax-deferred, and distributions in retirement are taxed as ordinary income. Because contributions were not taxed going in, they will be coming out.

Tax-deductible contributions (unless subject to income phaseout)
Tax-deferred investment growth – no capital gains taxes while saving for retirement
Early withdrawals before after age 59.5 not meeting exceptions (see below) subject to 10% penalty and income tax
Qualified withdrawals after age 59.5 or meeting exceptions are subject to income tax
Must begin taking withdrawals at age 73 (“required minimum distributions”).

IRA Early Withdrawal Exceptions

In addition to ordinary income tax, distributions before 59½ are subject to a 10% early withdrawal penalty, unless one of the exceptions below applies. See more information on the IRS website.

Substantially equal periodic payments under Section 72(t) — must continue for at least 5 years or until age 59½, whichever is longer
Domestic abuse victim distributions up to the lesser of $10,000 or 50% of the account (added under SECURE 2.0)
Health insurance premiums while unemployed (must have received unemployment for at least 12 weeks)
Emergency personal expenses up to $1,000 per year (added under SECURE 2.0, with repayment rules)
Death of the account owner (inherited IRA distributions are never subject to the 10% penalty)
Qualified higher education expenses for the account owner, spouse, child, or grandchild
Distributions made pursuant to a qualified domestic relations order in a divorce
Distributions to qualified military reservists called to active duty
Distributions for terminal illness (added under SECURE 2.0)
First-time home purchase ($10,000 lifetime maximum)
Birth or adoption of a child (up to $5,000 per child)
Medical expenses exceeding 7.5% of AGI
Federally declared disaster relief
Total and permanent disability
IRS levies on the account

The early withdrawal penalty is on top of the income tax. For example, withdrawing $20,000 at age 57 with no exception triggers ordinary income tax on the full amount plus a $2,000 penalty.

Roth IRAs

Contributions usually go in after-tax, investments grow tax-free, and qualified distributions in retirement are likewise completely tax-free. No required minimum distributions during the original owner’s lifetime.

Non-deductible, after-tax contributions
Tax-deferred investment growth
Contributions can be withdrawn anytime tax and penalty free (you already paid taxes on this money)
Investment earnings withdrawn before the account’s 5-year anniversary and age 59.5 are subject to 10% penalty and income tax
Withdrawals of earnings after 5 years AND age 59.5 (or meeting exception listed above) are tax-free
No required distributions in account owner’s lifetime

2026 Roth contribution phaseouts:

Above the top of the range, direct Roth contributions are not allowed. Backdoor Roth strategy may still work (discussed below). Within the range, contribution limit is based on an IRS formula.

Single filer: $153,000–$168,000 modified adjusted gross income
Married filing jointly: $242,000–$252,000 MAGI
Married filing separately: $0–$10,000 (does not adjust)

You can contribute to a Roth IRA even if you participate in an employer‑sponsored plan (such as a 401(k), 403(b), or 457). Being in a workplace plan does not affect your Roth IRA eligibility; it only impacts the deductibility of traditional IRA contributions.

Qualified Roth Distributions

Qualified Roth IRA distributions are the “best case” Roth withdrawals: they are completely tax‑free and penalty‑free, including the earnings.

A Roth IRA distribution is qualified only if it passes both of these tests:

Five‑year rule: At least five tax years have passed since January 1 of the year you made your first contribution to any Roth IRA.
Qualifying event: At the time of the withdrawal, at least one of the following is true:
- You are age 59½ or older
- You are disabled
- The withdrawal is made after your death (to your beneficiary)
- You use the funds for a first‑time home purchase (up to a $10,000 lifetime limit from Roth IRAs)

If both conditions are met, the entire distribution—your contributions and your earnings—comes out tax‑free with no 10% early‑withdrawal penalty. If either condition is not met, the distribution is not qualified, and any portion treated as earnings may be taxed and could face the 10% penalty unless a separate early‑withdrawal exception applies.

Roth IRA Five-Year Rules (Earnings vs. Conversions)

Two different five‑year periods are important for Roth IRA owners to prevent surprise taxes and penalties.

1. Five‑Year Rule for Roth Earnings

Your contributions to a Roth IRA can be withdrawn at any time, tax‑ and penalty‑free, because you already paid tax on that money. Your earnings (investment gains) in a Roth IRA are tax‑ and penalty‑free only if the distribution is “qualified.” A Roth distribution of earnings is qualified if:

At least five tax years have passed since January 1 of the year you first contributed to any Roth IRA; and
You are age 59½ or older or an exception from the list above applies (death, disability, first‑time home purchase, higher‑education expenses, certain medical, etc.)

If you take out earnings before meeting both tests, that portion of the distribution is generally subject to income tax and the 10% early distribution penalty.

For Roth IRA earnings there is one five-year clock per taxpayer, not per account. This five‑year clock starts on January 1 of the tax year you first contribute to ANY Roth IRA. Note this may not be the same as the date the specific Roth account you are taking the withdrawal from was opened.

2. Five‑Year Rule for Roth Conversions (Penalty on Converted Amounts)

Every Roth conversion has its own five‑year rule to determine if it is subject to the 10% penalty. Roth conversions were taxed when converted and won’t be taxed again, but can still be subject to the early withdrawal penalty if tapped too soon.

The five‑year period for Roth conversions starts on January 1 of the tax year of that conversion.
If you withdraw converted dollars within five years of that specific conversion and you are under age 59½, the converted amount is generally subject to the 10% penalty, unless an exception applies.

Once you reach age 59½, the conversion five‑year rule for penalty purposes effectively stops mattering; converted amounts can come out without the 10% penalty. However, the earnings five‑year rule still matters with respect to whether the distribution will be subject to income tax.

After 59½, the conversion five‑year rules no longer matters — there is no 10% penalty risk — but the earnings five‑year rule still determines whether any distributed earnings are subject to tax.

Roth Distributions – The Order Matters

When you take money out of your Roth IRAs, the IRS uses a fixed order across all of your Roth IRAs combined:

Contributions first – always tax‑ and penalty‑free.
Conversions next, first‑in‑first‑out (FIFO) – not taxed as income again, but each conversion is checked against its own five‑year penalty clock if you are under 59½.
Earnings last – subject to income tax and penalty if withdrawn before the account’s general five-year mark and before age 59½, unless an exception applies.

You can’t choose which “layer” you are taking out; this ordering is automatic under IRS rules. No cherry-picking.

The Aggregation Rule

In the eyes of the IRS you only have one IRA no matter how many IRA accounts you own. This is important when it comes to contribution limits and the pro-rata calculation on conversions.

For contribution limits: Your combined contributions across all traditional and Roth IRAs in a year cannot exceed the annual limit. You can split it however you want — all to one, half and half, anything in between — but you can’t double up.

EXAMPLE: you have both a Roth IRA and a traditional IRA, you make less than $153k as a single filer this year, and are 45 years old. The max you can contribute to BOTH accounts in total in 2026 is $7500. Any of these would work:

✅ $3750 into the traditional IRA and $3750 into the Roth

✅ $7500 into the traditional IRA and $0 into the Roth

✅ $0 into the traditional IRA and $7500 into the Roth

This would not work:

❌$7500 into the traditional IRA and $7500 into the Roth — OVER LIMIT

The Pro-Rata Rule & Roth Conversions

The IRS doesn’t let you isolate non-deductible (after-tax) dollars and convert only those. It looks at the total of all your pre-tax (traditional, SEP, and SIMPLE) IRA balances as one pool. Roth IRAs, inherited IRAs, and money held in 401(k)s and other qualified employer plans are not included in the pro-rata calculation

The proportion that’s pre-tax versus after-tax is the proportion of any conversion that’s taxable versus tax-free.

Roth Conversions: A Key Retirement Strategy Many Skip

A Roth conversion moves money from a traditional IRA (or pre-tax 401(k)) to a Roth IRA. You pay ordinary income tax on the converted amount in the year of conversion. After that, the money grows and comes out tax-free in retirement (subject to Roth distribution rules), with no required distributions during your lifetime.

For couples in their late 50s and early 60s with significant pre-tax retirement savings, the years between retirement and age 73 — when RMDs begin — often represent the lowest-income years of their adult lives. Wages have stopped. Social Security hasn’t started yet, or has just started, and required distributions haven’t yet kicked in. The marginal tax rate during this period is temporarily low, an opportunity that doesn’t repeat once it passes. This makes it an ideal Roth conversion window.

Missing the Roth conversion window is a common and potentially expensive mistake.

Roth conversion benefits

Reduce the amount of future required minimum distributions starting at 73
Reduces the size of the eventual tax bill. RMDs are taxed at ordinary income, so amounts not converted continue to grow, increasing the eventual tax bill.
Provides tax-free dollars to spend in years when ordinary income would push you into a higher bracket
Passes tax-free dollars to heirs, who otherwise inherit pre-tax dollars with a 10-year drawdown obligation
Reduces the surviving spouse’s tax exposure after the first death, when the survivor moves from joint to single brackets

The traps to model carefully:

IRMAA thresholds. A conversion that pushes your income above certain Medicare premium thresholds triggers surcharges on Part B and Part D premiums two years later. The income test is a cliff, not a phase-in — one dollar over and the full surcharge applies. Multiple thresholds; the higher you go, the larger the surcharge.
Social Security taxation. Conversions can push more of your Social Security benefit into taxable territory.
Net Investment Income Tax. Pushing income over $250,000 (MFJ) can trigger the 3.8% NIIT on investment income.
Capital gains brackets. A large conversion can push otherwise-zero-percent long-term capital gains into the 15% or 20% bracket.
State income tax. Some states tax conversions at ordinary rates with no special treatment. If you’re planning to move to a no-income-tax state, conversions might be better timed after the move.
The five-year rule on conversions. Each conversion has its own five-year clock for the 10% penalty. If you might need access to converted dollars within five years and you’re under 59½, factor that in.

The right conversion amount in any given year depends on your bracket headroom, projected RMDs, Social Security claiming strategy, Medicare enrollment timing, state of residence, and the after-tax dollars available to pay the conversion tax (paying the tax from the converted amount itself defeats much of the strategy’s purpose).

This is valuable analysis a good financial advisor can perform for clients in the pre-RMD window. Click here to schedule a conversation.

The Backdoor Roth and the Pro-Rata Rule

If you make too much money to contribute to a Roth directly, you may be eligible for a “back door” Roth. This involves making a non-deductible IRA contribution (no current year tax benefit), and then converting it to a Roth.

EXAMPLE: $400,000 in traditional IRAs total and you make a $7500 non-deductible IRA contribution, planning to do a “backdoor” Roth. If you convert $7,500 to a Roth, the IRS records you having total IRA dollars of $407,500 because of the pro-rata rule. They treat the conversion proportionally. $7500 is about 1.84% of $407,500. So 1.84% of the conversion will tax-free, and the remaining 98.16% is taxable — even though you already paid taxes on those funds.

This is why backdoor Roths work best for those with no other IRAs.

One workaround: if your current 401(k) accepts rollovers into the plan, you can move pre-tax IRA money into the 401(k), clearing the pro-rata calculation. Then the backdoor Roth works as intended. Not all plans allow this.

Note: When making a non-deductible IRA contribution it’s important to file IRS form 8606 with your taxes so the IRS knows you were taxed on that amount. This affects your ability to do future Roth conversions.

Mega Backdoor Roth

The Mega Backdoor Roth lets you move far more into Roth than the standard limits allow — but only if your specific 401(k) plan is built to support it. Three plan features have to line up. Check your Summary Plan Description, or ask your benefits department:

Your plan allows non‑Roth, after‑tax contributions. These are separate from, and on top of, your regular pre‑tax or Roth 401(k) deferrals.
Your plan allows either in‑plan Roth conversions or in‑service (non‑hardship) distributions. This is what lets you move the after‑tax money into a Roth 401(k) or Roth IRA without waiting until you leave the employer.
Your plan tracks pre‑tax and after‑tax dollars separately. Separate subaccounts let you convert only the after‑tax portion cleanly. Without this, conversions can be subject to pro‑rata rules and become partly taxable.

If all three are true, here’s the basic sequence:

First, max out your regular salary deferral — $24,500 for 2026, or $32,500 if you’re 50 or older (includes $8,000 catch‑up).
Then contribute non‑Roth after‑tax dollars up to the overall plan limit. The total of all contributions — your deferrals, employer match/profit sharing, and after‑tax contributions, excluding catch‑up — can reach up to $72,000 for 2026.
Your “mega backdoor” capacity is the $72,000 total limit minus everything already contributed (your pre‑tax/Roth deferrals and all employer contributions – catch up contributions don’t count toward this limit).
Convert the after‑tax money to Roth as soon as the plan permits. Moving quickly keeps earnings in the after‑tax subaccount small; those earnings are pre‑tax and become taxable when converted.

If your plan is missing any of these features, the strategy isn’t available — and that’s common. Many plans don’t allow after‑tax contributions or in‑service conversions/rollovers at all, so it’s worth confirming before you count on it.

IRA Rollovers

When you leave an employer or retire, you generally have four options for your 401(k) or other retirement plan: leave it where it is, roll it to your new employer’s plan, roll it to an IRA, or cash it out. Distributions from the retirement plans can be “rolled over” into an IRA in the taxpayer’s name tax-free as long as the funds make it into the IRA within 60 days of the distribution date. Distribution amounts not rolled over would be subject to income tax and possibly early withdrawal penalties.

In most ways Rollover IRAs work just like traditional IRAs with some important distinctions.

Unlike traditional IRA contributions which come from earnings, there is no dollar limit on rollover contributions.
Unlike traditional IRAs which offer creditor protection up to a specific dollar amount, rollover IRAs enjoy UNLIMITED creditor protections just like qualified retirement plans.
IRA rollovers must be reported on tax forms, though they remain tax-free if done correctly.

Rolling to an IRA is often a good way to continue to receive pre-tax investment growth on retirement savings, and can offer more investment flexibility. But rollovers need to be done carefully to get preferred tax treatment.

Direct rollover (trustee-to-trustee transfer): Money goes directly from your old plan to the new IRA without passing through your hands. No tax withholding. No 60-day window. This is the clean version, and it’s what you should always request unless there’s a specific reason not to.

Indirect rollover: The plan sends you a check. By law, they must withhold 20% for federal income tax. To complete the rollover tax-free, you must deposit the full original amount — including the 20% they withheld — into an IRA within 60 days. You’ll need to come up with the withheld portion from other funds; you’ll get the withheld amount back as a refund when you file your taxes.

EXAMPLE: You rollover $500,000 from your 401(k) into an IRA, and have the plan send the money to you. The plan sponsor withholds $100,000 (20% of $500k) for taxes, and sends you a check for $400,000. Within 60 days you need to deposit $500,000 into the rollover IRA account to avoid taxes and penalties. If you don’t have an extra $100k lying around, you’re out of luck.

Miss the 60-day window and the rollover becomes a distribution: ordinary income tax plus the 10% penalty applies if you’re under 59½.

The one‑rollover‑per‑year rule

You can only do one indirect IRA‑to‑IRA rollover in any 12‑month period, across all of your IRAs combined. This limit applies only to 60‑day, “you‑get‑the‑check” IRA‑to‑IRA rollovers. It does not apply to direct trustee‑to‑trustee transfers, and it does not apply to rollovers from employer plans (like a 401(k)) into an IRA. If you violate this rule, the later rollover is treated as a taxable distribution, and if the funds are then deposited into another IRA, that deposit can be treated as an excess contribution subject to its own penalties.

IRA-to-HSA rollover

Facing unexpected medical bills? Once in your lifetime, you can roll IRA funds directly into a Health Savings Account, tax-free. The maximum is the annual HSA contribution limit. In 2026 these are $4,400 for individual coverage, $8,750 for family coverage. You must be covered by a high-deductible health plan for 12 months after the rollover or the amount becomes taxable and subject to a 10% penalty.

Net Unrealized Appreciation

If you hold employer stock inside your 401(k) with significant appreciation, there’s a strategy worth understanding BEFORE you roll the full account into an IRA.

Under NUA treatment, you can move the company stock to a taxable brokerage account, paying ordinary income tax only on the cost basis. The appreciation is then taxed at long-term capital gains rates when you sell the stock — typically a much lower rate than ordinary income. This is a one-shot decision; once you roll the stock into an IRA, the NUA opportunity is gone permanently. If you have appreciated employer stock in a 401(k), this analysis needs to happen before the rollover.

This is another area where consulting an experienced advisor can save you thousands in taxes down the road. Click here to schedule a conversation.

Required Minimum Distributions

You’ll be shocked to know – the government wants their tax money. So once you reach age 73, the IRS requires annual withdrawals from your traditional IRA and most other pre-tax retirement accounts. The SECURE 2.0 Act raised the RMD age to 73 beginning in 2023 and will raise it again to 75 beginning in 2033. In practice, this means most people born 1960 or later will start RMDs at age 75.

Roth IRAs have no RMDs during the original owner’s lifetime. This is one of the strongest arguments for the multi-year Roth conversion strategy described above.

There are a bunch of rules around how and when RMDs must be taken. Don’t worry, I’ve got you covered.

How to Start RMDs

Your first RMD can be either taken the year you turn 73 or delayed until April 1 of the following year. If you delay to the following year, you must take two distributions that calendar year: the first by April 1, the second by December 31. The combined income can push you into a higher bracket and trigger IRMAA. Thus it is often cleaner to take the first RMD in the year you actually turn 73.

Calculating Your RMD

Take the December 31 prior-year balance of the account.
Divide by the distribution factor from the IRS Uniform Lifetime Table (Table III) for your age.
If your sole beneficiary is a spouse more than 10 years younger than you, use the Joint Life and Last Survivor Expectancy Table (Table II) instead, which produces a lower required amount.

Follow the link to the IRS website and scroll down to find Table III. The factor at age 73 is 26.5, at 75 is 24.6, at 80 is 20.2, at 85 is 16.0, declining each year. So a $1,000,000 traditional IRA at age 73 produces an RMD of $1,000,000 ÷ 26.5 = $37,736 for the current year.

The Aggregation Rule for RMDs

Again, in the eyes of the government, you only have one IRA no matter how many accounts you have.

As with contributions, all traditional IRAs are aggregated when calculating RMDs. You can also satisfy the total required distribution from any one account or any combination of accounts. Using the $1 million IRA example above, that person could withdraw the $37,736 from one account or any combination of IRAs if they had more than one.

This does not apply across account types — your 401(k) RMD has to come from that 401(k), not from an IRA. Multiple 403(b) accounts can be aggregated similarly to IRAs. Inherited IRAs are aggregated with each other only if inherited from the same person, and never with your own IRAs.

RMD penalties

Take less than required and the penalty is 25% of the shortfall (reduced from 50% under SECURE 2.0), or 10% if corrected within two years.

Still-Working Exception for Retirement Plans

If you’re still working past 73 and you have a 401(k) at your current employer, you can generally delay RMDs from that specific 401(k) until you retire — but only if you own less than 5% of the company. This exception does not apply to IRAs. Once you turn 73, IRA RMDs are required whether you’re working or not.

Qualified Charitable Distributions

Once you’re 70½ or older, you can direct up to $111,000 per year (2026 limit, indexed annually) directly from your IRA to a qualified charity. The QCD counts toward your RMD but is excluded from your taxable income entirely. For charitably inclined retirees, QCDs are almost always better than taking the RMD as income and then donating. The QCD lowers AGI, which can reduce IRMAA, Social Security taxation, and the floor for medical expense deductions.

Inherited IRAs

The rules for inherited retirement accounts changed substantially under the SECURE Act of 2019 and were further clarified (and complicated) by SECURE 2.0 and subsequent IRS guidance.

Inherited IRAs are titled specifically. An inherited IRA must be titled to indicate it’s an inherited account — for example, “Jane Smith (deceased 11/15/2024) FBO Patty Smith” (FBO = “For Benefit Of”).

You cannot make contributions to an inherited IRA. You cannot roll an inherited IRA into your own IRA unless you’re a surviving spouse.

The amount and timing of post-death RMDs depends on the type of beneficiary.

Types of Beneficiaries

1. Non-designated beneficiaries — estates, charities, most trusts. These are non-person beneficiaries.

If the account owner died before their Required Beginning Date (the date RMDs must start): the account must be emptied within five years.
If the account owner died after RBD: distributions continue based on the deceased’s remaining single life expectancy.

2. Designated beneficiaries — a living person more than 10 years younger than the deceased. Most living-person heirs who don’t qualify for “eligible” status. Typically healthy adult children.

Subject to the 10-year rule. The account must be emptied by December 31 of the 10th year after death.
If the original owner had already started RMDs at death, the beneficiary must take annual RMDs in years 1–9 and empty the account by year 10. (The IRS waived this requirement for 2021–2024 while it finalized regulations; it applies starting in 2025.)
If the original owner had not yet reached RMD age at death, no annual RMDs are required during the 10 years — but the account must still be empty by year 10.

3. Eligible designated beneficiaries (EDBs) — surviving spouses, minor children of the deceased (until the age of majority), disabled or chronically ill individuals, and beneficiaries not more than 10 years younger than the deceased.

Can stretch distributions over their own life expectancy, similar to the pre-SECURE rules.
Surviving spouses have additional options described below.
Minor children switch to the 10-year rule once they reach the age of majority.

Surviving Spouse

A surviving spouse has the most flexibility of any beneficiary. They can:

Roll the inherited IRA into your own IRA. Combines with your existing IRA, follows your own RMD schedule based on your age, allows future contributions. The catch: distributions before you turn 59½ trigger the 10% early withdrawal penalty.
Treat as your own. Similar effect to the rollover.
Keep as an inherited IRA. Distributions never subject to the 10% early withdrawal penalty (death exception applies). RMDs are based on the deceased’s age, not yours. Useful if the surviving spouse is younger than 59½ and needs access to the funds, or if the deceased was younger and an inherited treatment delays RMDs.

The choice usually depends on the surviving spouse’s age, the deceased’s age, and the need for current income. A 55-year-old widow who needs access to the money should typically keep it as an inherited IRA to avoid the early withdrawal penalty. A 70-year-old widow with no current income need typically should roll it into her own IRA to delay RMDs.

Inherited Roth IRAs

Roths follow the same 10-year rule for non-spouse beneficiaries, but distributions are generally income-tax-free if the original five-year holding requirement is met. Surviving spouses can roll an inherited Roth into their own Roth and inherit the original five-year clock.

Successor Beneficiaries

When someone who already inherited an IRA dies, their “successor beneficiary” can’t restart the payout period or get a fresh 10 years. They are bound by the payout timeline tied to the original owner or original beneficiary — either finishing the original 10‑year period or, in some cases, emptying the account within 10 years of the original beneficiary’s death.

Beneficiary designation supersedes your will

Whoever is named as the beneficiary on the IRA receives the account, regardless of what your will says. This is one of the most common estate planning errors: an outdated beneficiary designation — an ex-spouse, a deceased parent, no contingent beneficiary at all — overrides the carefully drafted will. Review beneficiary designations on every IRA, every 401(k), every life insurance policy, and every transfer-on-death account at least every two years, and after any major life event.

If no beneficiary is named, the account typically passes to the estate — losing the stretch and tax-deferral benefits the beneficiary would have had, and subjecting the account to probate.

Per stirpes vs. per capita. If you name three children as 33%/33%/33% beneficiaries and one predeceases you, what happens to that share? Per stirpes means it passes to that child’s descendants. Per capita means it’s divided among the surviving named beneficiaries. Most IRA beneficiary forms default to per capita unless you specifically select per stirpes — a meaningful estate planning detail that doesn’t get attention.

Trusts as IRA beneficiaries. A trust can be named as an IRA beneficiary, and in certain situations (minor children, beneficiaries with creditor or special-needs concerns, control of distributions) it makes sense. The trust must meet specific IRS “see-through” or “conduit” requirements to preserve the 10-year stretch treatment. Naming the wrong type of trust can collapse the inherited IRA to the 5-year rule. This is a coordination point between your estate attorney and your financial advisor — not a DIY decision.

Non‑spouse beneficiary rollover from inherited 401(k)

If you inherit a 401(k) as a non‑spouse, the plan may allow a direct trustee‑to‑trustee transfer of the inherited 401(k) into an inherited IRA in your name. From there, you’re generally subject to the SECURE Act’s 10‑year rule: the inherited IRA must be fully emptied by the end of the 10th year after the original owner’s death. This is often preferable to leaving the funds in the original 401(k), which may offer fewer withdrawal options or require faster payouts.

Other Things Worth Knowing

Prohibited transactions. Certain transactions blow up the IRA — the entire account becomes a taxable distribution as of January 1 of the year of the prohibited transaction, plus penalties. The list:

Receiving unreasonable compensation for managing your own IRA
Borrowing from your IRA or pledging it as collateral for a loan
Buying property for personal use with IRA funds
Selling property to or buying property from your IRA
Self-dealing transactions between the IRA and “disqualified persons” (you, your spouse, ancestors, descendants, and entities you control)

This is a hard line. The consequences of crossing it are not proportional to the size of the transaction.

Prohibited investments inside an IRA:

Collectibles (art, antiques, rugs, gems, stamps, coins — with exceptions for certain U.S. gold, silver, and platinum coins and bullion)
Life insurance contracts
S-corporation stock (S-corp restrictions on who can be a shareholder)
Foreign coins (most)

Common IRA Mistakes

Excess contributions. Usually triggered by the aggregation rule (contributing the full limit to both a Roth and a traditional in the same year) or a misread of the income phaseout. The 6% excise tax compounds annually until corrected.

Backdoor Roth without accounting for existing pre-tax IRA balances. The pro-rata rule turns what looks like a clean tax-free conversion into a partially taxable one. Solve it by rolling pre-tax IRA funds into a 401(k) first, if your plan allows it.

Forgetting Form 8606. Non-deductible contributions and Roth conversions require Form 8606. Years of unfiled 8606s mean lost basis tracking and double taxation when you finally distribute.

Indirect 401(k) rollovers without accounting for the 20% withholding. The most common version: spending the withheld portion before realizing it needs to be replaced from other funds to complete the rollover.

Delaying the first RMD to the following April without modeling the double-distribution year. Two RMDs in one year can push you over an IRMAA bracket and add thousands in Medicare premiums two years later.

Outdated beneficiary designations. Ex-spouses, deceased parents, no contingent beneficiary. The IRA passes by beneficiary form, not by will.

Missing the Roth conversion window. The years between retirement and RMD age don’t repeat. Converting nothing during that window is one of the most expensive missed opportunities in pre-retirement planning.

Skipping QCDs when charitably inclined. Donating cash and taking the RMD as income is almost always worse than directing the RMD to the charity via QCD. Lower AGI, less Social Security taxation, lower IRMAA exposure.

NUA on company stock. Rolling appreciated company stock into an IRA without considering NUA treatment can convert what would have been long-term capital gains into ordinary income — a difference of 10–20 percentage points on the tax rate.

Treating the spouse as an afterthought in beneficiary planning. The surviving spouse’s options on an inherited IRA depend on choices made at the beneficiary form level, and on understanding both spouses’ ages, income needs, and tax positions. Both spouses should know what they hold, where it is, and what the plan is — not just the one who handles the finances.

IRAs aren’t difficult once you understand the rules. The difficulty is that the rules are layered, interact with each other, and rarely surface until they’ve already created a problem. The conversion window closes. The pro-rata rule turns a backdoor Roth into a tax bill. The 10-year clock runs out on an inherited account. The IRMAA threshold pushes Medicare premiums up for two years.

A systematic review of IRA strategy in the decade before retirement covering contributions, conversions, projected RMDs, beneficiary designations, NUA opportunities, QCDs, and everything above is one of the most valuable planning exercises someone approaching retirement can do. The potential tax and investment savings are massive.

If you’d like to walk through your specific situation, it’s worth a phone call. Schedule a conversation here.

Matt Gagnon is a CFA® charterholder and fee-only financial advisor serving couples in the decade before retirement. Financial Empowerment LLC is a registered investment advisor in the State of Texas.