If a Parent Dies at 71, an Inherited IRA Can Sit Untouched for Nine Years — But Year 10 Can Trigger a Huge Tax Hit, and Advisors Prefer This Withdrawal Plan Instead

Receiving a $500,000 IRA may feel like a blessing at first, but the tax rules can quickly turn it into a problem if the entire account is left for one final withdrawal.

Her father died at 71, leaving behind a $500,000 traditional IRA with her listed as the sole beneficiary. She was 48, unmarried, and earning enough to report $150,000 in taxable income each year. The custodian’s forms indicated that she would not need to take any required withdrawals until the final year.

If she leaves the account alone, it would not appear on her tax return for nine years. Then, in the tenth year, she would take the full $500,000 at once. To keep the example simple, assume the balance stays unchanged over that period.

At that point, her taxable income would rise to $650,000, and she would owe $167,859.25 in federal tax on the inherited money alone.

Why Dying Before 73 Stops Annual Withdrawals

Section 401 of the SECURE Act amended section 401(a)(9) of the Internal Revenue Code and created new RMD rules for designated beneficiaries. Most adult children land in the category with the least flexibility. IRS Publication 590-B defines “eligible designated beneficiaries” as the owner’s surviving spouse, minor child, disabled individual, chronically ill individual, or another person who is no more than 10 years younger than the IRA owner. A healthy 48-year-old daughter does not qualify.

Everyone else must empty the account by December 31 of the year that includes the 10th anniversary of the owner’s death. The IRS gives this 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 the first nine years. SECURE 2.0 pushed the required beginning date to age 73 for people born on or after January 1, 1951. Because he died at 71, before that threshold, Publication 590-B says no distribution is required for any year before the 10th year. If he had died at 74, annual RMDs based on life expectancy would have been required each year. That rule comes from final regulations released in 2024.

Missing the year-10 deadline can trigger an excise tax of 25% of the amount by which the minimum required distribution exceeds what was actually taken out under 26 U.S.C. § 4974(a).

Year 10 Gets Taxed at 2026 Rates

The calculation below uses 2026 single-filer brackets as a proxy for later years. In 2026, the top federal rate remains 37% for single taxpayers with income above $640,600. Income over $256,225 is taxed at 35%.

Most of the inheritance would be taxed at 35%, with the final dollars pushed into the 37% bracket. Under 26 U.S.C. § 408(d), IRA distributions are taxed in the year they are received, so one withdrawal cannot be spread across multiple tax years.

A Bracket-Filling Strategy Cuts the Bill by Nearly $48,000

Advisors often time withdrawals to match the beneficiary’s tax bracket. In 2026, the 24% bracket for single filers runs up to $201,775, while the 32% bracket begins above that. With $150,000 of other taxable income, she would have $51,775 of room left in the 24% bracket each year.

Ten annual withdrawals of $50,000 would fit inside that space. Each one would add $12,000 of tax, or $120,000 over the full decade. Compared with taking the entire account in year 10, that would save $47,859.25 in federal tax.

In practice, the advantage can be even larger. An account left untouched may keep growing, which means the year-10 balance could exceed $500,000 and more of it would be taxed at 35% and 37%. Advisors also tend to take larger distributions during low-income years, such as a job gap, a sabbatical, or the first year of early retirement, and smaller ones in higher-income years when bonuses are involved.

Steps to Take Before December 31

As the year-end deadline approaches, beneficiaries of inherited IRAs should make a few key moves before December 31.

• Confirm the required beginning date. Ask the custodian for the owner’s birth date and whether required minimum distributions had already started. That determines whether annual withdrawals are needed in years one through nine.
• Record the final deadline. The account must be emptied by December 31 of the year that contains the 10th anniversary of the death. Put that date on the calendar now.
• Review your bracket each fall. Before year-end, estimate taxable income and withdraw enough to fill the top of your current bracket.
• Arrange withholding on each distribution. Federal withholding, or quarterly estimated payments, can help you avoid an underpayment penalty when taxes are due.
• Verify the beneficiary category. A sibling within 10 years of the parent’s age, or a disabled or chronically ill heir, may qualify as an eligible designated beneficiary and use life expectancy payouts instead.

A CPA or estate tax attorney can help confirm the correct schedule for your own situation and state. The inherited IRA deadline is one of several IRS rules that can quietly drain six figures from retirement accounts.

The number to remember is $47,859.25. On a $500,000 inherited IRA, that is the federal tax difference between waiting until year 10 and taking distributions gradually each year.