She Inherited a $300,000 IRA and Let It Grow Untouched for Nine Years, Exactly What the IRS Was Hoping For.

Since the SECURE Act of 2019, most non-spouse beneficiaries of a traditional IRA must fully empty the account by the end of the tenth year following the original owner’s death. The old “stretch IRA,” which allowed a beneficiary to spread withdrawals across their own lifetime, is gone. The account now has an expiration date, and every dollar of growth inside it is a dollar the IRS eventually taxes at ordinary income rates.

Nine years of untouched growth compounds meaningfully. A broad S&P 500 proxy like SPDR S&P 500 ETF Trust (NYSEARCA:SPY) returned roughly 216% from August 14, 2017, through August 13, 2026. A $300,000 inherited IRA parked in a broad market fund and left alone across that stretch would have grown into something close to $900,000. That is a bracket-busting distribution waiting in year ten.

The Math the IRS Is Quietly Counting On

A traditional inherited IRA has never been taxed. Every withdrawal counts as ordinary income to the beneficiary. If the account roughly triples across nine years and the full remaining balance must come out by December 31 of year ten, the beneficiary faces a forced distribution that can push them into the top federal brackets, layered on top of state income tax. The larger the untouched balance grows, the more the government eventually collects.

Many beneficiaries missed a wrinkle. Under the final regulations the IRS issued in 2024, non-spouse beneficiaries of owners who had already begun required minimum distributions must take annual RMDs during years one through nine of the ten-year window, then clear the account in year ten. Skipping those annual withdrawals for nine years, then draining the whole balance at the end, produces the worst-case tax outcome and the exact behavior the ten-year rule was designed to encourage among people who do not plan ahead.

Why Inherited IRAs Land in a Household Starved for Savings

The typical starting point is modest. Fidelity’s Q3 2025 analysis put the average IRA balance for Gen X at $103,952 and for millennials at $25,109. A $300,000 inherited IRA dwarfs the beneficiary’s own retirement savings in most cases, which makes the drawdown decision materially more consequential than beneficiaries usually recognize when the paperwork arrives.

The Alternative Paths That Rarely Get Taken

An even-planning approach, taking roughly one-tenth of the balance each year, would have smoothed the tax hit across nine tax years at potentially lower marginal brackets, while still capturing most of the compounding on the balance that remained inside the account. The untouched-for-nine-years pattern instead concentrates the entire tax event into a single year, often the year the beneficiary is still in peak earnings.

What the Data Documents

The ten-year rule replaced a lifetime stretch that could span forty or fifty years. Compressing distributions into ten years accelerates federal revenue in a measurable way, and doing nothing for nine of those ten years accelerates it further. An inherited IRA that grew from $300,000 to something near $900,000 while sitting untouched reflects a tax code rewritten to make that exact behavior expensive.

Contact [email protected] for any questions or corrections.