Inherit a $280,000 IRA at 59 and Let It Grow Untouched for Nine Years, and Year Ten Puts About $430,000 of Taxable Income on a Single Tax Return, More Than a Third of It at 37%
Letting an inherited IRA grow untouched sounds like a smart move until the 10-year deadline arrives and the IRS hands you a single tax return that can swallow a quarter of the account before your state even takes a cut.
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Inheriting a parent’s traditional IRA at 59 comes with a deadline most retirement savers never face. A non-eligible designated beneficiary must empty the account by December 31 of the year containing the 10th anniversary of the owner’s death. The IRS says no distribution is required for any year before the 10th year when the owner died before their required beginning date. That flexibility makes one plan look attractive: leave the money alone and let it compound.
Take a $280,000 inheritance and assume it earns an average annual return of 5%. If the heir leaves it alone for nine years, the account grows to roughly $434,000. Traditional IRA distributions are generally taxable in the year you receive them, so by the time the deadline arrives and the heir is in their late 60s, they owe ordinary-income tax on that entire balance.
One Year of Income Compared With a Typical Paycheck
For comparison, real median personal income in the U.S. was $46,960 in the latest annual reading, measured in 2024 dollars. A distribution of about $430,000 is roughly 9 times that amount. Most workers earning near the median spend their careers in the lower brackets. A lump-sum withdrawal takes a decade of growth, puts it on one tax return, and runs it up the bracket schedule in a single year.
Where $430,000 Falls on the 2026 Tax Schedule
Under the IRS’s 2026 brackets for single filers, the 35% rate applies to income over $256,225. The top 37% rate starts at income greater than $640,600. Those two thresholds decide how much of the inheritance is taxed at the top rates.
Say the $430,000 is the heir’s only taxable income. Then $173,775 falls into the 35% bracket, about 40% of the total. The federal tax comes to roughly $119,269, an effective rate of about 28%. About a quarter of the inheritance goes to federal tax before any state tax applies.
The 37% rate applies when the IRA money sits on top of other income. For more than a third of the inheritance to be taxed at 37%, the heir needs about $354,000 of other taxable income, such as wages, business profits, or deferred compensation. Someone still running a practice or drawing a large pension in their late 60s fits that description, and for them a big share of the inheritance is taxed at the highest rate in the code.
Some Heirs Must Take Withdrawals Every Year
Waiting nine years only works in one situation. If the original owner had already started required minimum distributions before death, annual RMDs are required during the 10-year period. Many beneficiaries started facing those annual withdrawals in 2025.
If money remains in the account after the 10-year deadline, the IRS imposes an excise tax on the excess for insufficient distributions. Heirs in this group can’t simply leave the account alone, and the inherited-IRA deadline is only one of several IRS rules that quietly drain retirement accounts (we mapped nine of them in a free tax trap guide).
Spreading Withdrawals Keeps Income in Lower Brackets
The other option is to take equal withdrawals. At the same 5% return, pulling out about $36,261 a year empties a $280,000 account in ten years. Each withdrawal is small enough to fit within the brackets the heir already pays. Take an heir with income near the national median who claims the 2026 standard deduction of $16,100. Adding the annual withdrawal brings taxable income to about $67,121.
That keeps the heir in the 22% bracket, which applies to single filers with income over $50,400. Each inherited dollar is taxed at that rate, compared with 35% or 37% at the top under the year-ten lump sum.
What the Year-Ten Math Means for Heirs
The 10-year rule lets heirs decide when to take the money, and that timing strongly affects what they owe. Leaving the account untouched gives it the most time to grow tax-deferred. It also pushes all that growth into one year, when the bracket schedule is steepest. Three factors shape the size of the year-ten bill:
- Find out whether the owner died before or after their required beginning date. For people born in or after 1951, that date is tied to age 73. The answer determines whether annual RMDs apply.
- Set withdrawals each year against a bracket ceiling. For single filers in 2026, the 24% bracket ends at $201,775, and withdrawals that stay below that line avoid the 32% and 35% rates.
- Take larger withdrawals in low-income years, such as the gap between leaving work and starting Social Security, when there’s more room in the lower brackets.
The account grows the same way under either plan. The difference is how much of that growth the heir keeps after tax.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
