Retiree's Roth-First Strategy Sticks Heirs With $120,000 Tax Bill Under 10-Year IRA Rule
Updated
Updated · 24/7 Wall St. · Sep 12
Retiree's Roth-First Strategy Sticks Heirs With $120,000 Tax Bill Under 10-Year IRA Rule
2 articles · Updated · 24/7 Wall St. · Sep 12
Summary
$120,000 in added federal tax can hit two adult children when a parent preserves a $500,000 traditional IRA and spends Roth assets first, leaving heirs to drain taxable IRA money over 10 years.
The SECURE Act ended the old lifetime 'stretch' for most non-spouse beneficiaries in 2020, requiring inherited traditional IRAs to be emptied within a decade while inherited seasoned Roth withdrawals remain tax-free.
In the example, each child earning $100,000 withdraws $25,000 a year from a $250,000 inherited IRA, pushing most of that income into the 24% bracket under 2025 single-filer rates.
The article says the better sequence is often the reverse: use low-income years between retirement and age 73 to draw down or convert traditional IRA balances, while confirming the Roth meets the five-year rule and beneficiary forms are current.