If Dad Died at 71, Your Inherited IRA Has No Required Withdrawals for Nine Years. Wait for Year 10 and the Whole $500,000 Lands on One Return at 37%, and Here’s the Schedule Advisors Build Instead
Inheriting a $500,000 IRA sounds like a windfall until the IRS hands you a single year to empty it and a tax bill that can swallow a third of the balance before you cash the check.
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Her father died in 2025 at 71, leaving a $500,000 traditional IRA with her named as the sole beneficiary. She was 48, single, and making enough to report $150,000 of taxable income a year. The custodian’s paperwork said she had no required withdrawals until the final year.
Suppose she leaves the account alone. For nine years it never shows up on her tax return. Then the deadline arrives, and she takes the full $500,000 in one distribution. To keep the math clean, assume the balance stays flat over the decade.
That year her taxable income would be $650,000. She would owe $167,859.25 in federal tax on the inherited money alone.
Dying Before 73 Switches Off the Annual Withdrawals
Section 401 of the SECURE Act amended section 401(a)(9) of the Code to provide new RMD rules for designated beneficiaries. Most adult children fall into the group that gets the least room. IRS Publication 590-B limits “eligible designated beneficiaries” to the owner’s surviving spouse, the owner’s minor child, a disabled individual, a chronically ill individual, or any other individual who is not more than 10 years younger than the IRA owner. A healthy 48-year-old daughter doesn’t qualify.
Everyone else has to empty the account by December 31 of the year containing the 10th anniversary of the owner’s death. The IRS gives an example: if the owner died in 2025, the account must be fully distributed by December 31, 2035.
The father’s age at death determines what happens in years one through nine. SECURE 2.0 moved the required beginning date to age 73, for employees born on or after January 1, 1951. He died at 71, before that date. Publication 590-B states: “no distribution is required for any year before the 10th year.” If he had died at 74, she would owe annual RMDs based on life expectancy every year. That requirement comes from final regulations published on July 19, 2024.
Missing the year-10 deadline triggers an excise tax equal to 25% of the amount by which such minimum required distribution exceeds the actual amount distributed under 26 U.S.C. § 4974(a).
Year 10 Taxed at 2026 Rates
The math below uses 2026 single-filer brackets as a stand-in for future years. In 2026, the top rate remains 37% for individual single taxpayers with incomes greater than $640,600. Income above $256,225 is taxed at 35%.
| Item | Lump sum in year 10 |
|---|---|
| Taxable income | $650,000 |
| Total federal tax | $196,457.25 |
| Tax from by the IRA | $167,859.25 |
| Income taxed at 37% | $9,400 |
| Effective rate on the $500,000 | 33.6% |
Most of the inheritance gets taxed at 35%, and the last dollars cross into 37%. Under 26 U.S.C. § 408(d), money paid out of an IRA counts as income in the year it is received, so she can’t spread one check across several tax years.
A Bracket-Filling Schedule Saves Nearly $48,000
Advisors plan withdrawals around her tax bracket. The 24% bracket for single filers runs to $201,775 in 2026 (the 32% rate starts above that). With $150,000 of other taxable income, she has $51,775 of room left in the 24% bracket each year.
Ten equal withdrawals of $50,000 fit inside that space. Each one adds $12,000 of tax, for a total of $120,000 over the decade. Compared with the year-10 lump sum, that is $47,859.25 less in federal tax.
In real life the gap gets wider. An untouched account keeps growing, so the year-10 balance tops $500,000 and more of it lands at 35% and 37%. Advisors also take bigger withdrawals in low-income years, such as a gap between jobs, a sabbatical or the first year of early retirement, and smaller ones in years with bonuses.
Moves to Make Before December 31
With year-end coming, Kiplinger noted this week that inherited IRA beneficiaries face critical moves before December 31.
- Confirm the required beginning date. Ask the custodian for the owner’s birth date and whether he had started RMDs. That answer determines whether annual withdrawals are required in years one through nine.
- Write down the final deadline. It is December 31 of the year containing the 10th anniversary of the death. Put it on the calendar now.
- Run a bracket projection every fall. Before year-end, estimate your taxable income and withdraw up to the top of your current bracket.
- Set up withholding on each distribution. Federal withholding on each withdrawal, or quarterly estimated payments, helps you avoid an underpayment penalty in April.
- Check the beneficiary category. A sibling within 10 years of the parent’s age, or a disabled or chronically ill heir, counts as an eligible designated beneficiary and can use life expectancy payouts instead.
A CPA or estate tax attorney can confirm the right schedule for your own income and state. The inherited IRA deadline is one of nine IRS rules that quietly drain six figures from retirement accounts, and we mapped all of them in a free report here.
The figure to keep in mind is $47,859.25. On a $500,000 inherited IRA, that is the difference in federal tax between waiting for year 10 and taking one slice each year.
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Vilma Rios is a tax professional and tax content contributor with more than 15 years of experience in tax and accounting. She specializes in federal tax research, tax education, and translating complex tax rules into clear, practical information for individuals, families, and small-business owners.
Vilma is a Content Tax Contributor II with the National Association of Tax Professionals (NATP), where she contributes to tax education and professional content. She has also presented tax information through webinars, including Spanish-language tax education, and has appeared on Telemundo 47 discussing tax topics and helping viewers understand important tax-filing requirements.
Her experience also includes tax and accounting work, tax research, IRS-related matters, and public tax education. While in college, Vilma volunteered in an IRS-sponsored tax assistance program and was recognized for her community service by local and state officials.
Known as “Your Tax Geek,” Vilma is passionate about making taxes easier to understand and helping people navigate an increasingly complex tax system.
