From 24/7 Wall St. · Jake FitzGerald · · 1m 30s
She'll Inherit $500,000 IRA at 54
Daughter plans to leave father's IRA untouched for 10 years despite IRS annual withdrawals.
In brief
Daughter plans to leave father's IRA untouched for 10 years despite IRS annual withdrawals. Daughter of 54-year-old finance manager inherits $500,000 IRA but must take annual IRS withdrawals until year 10, risking higher taxes on final balance. Originally reported by 24/7 Wall St..
Daughter inherits $500,000 IRA
A 54-year-old finance manager learns her father named her sole beneficiary of his $500,000 traditional IRA.
IRS requires annual withdrawals
The IRS expects a withdrawal from her inherited account every year because her father was already taking required minimum distributions.
Ten-year rule applies
She must withdraw the entire balance by December 31 of the year containing the 10th anniversary of her father's death.
Father's required beginning date
Her father reached his required beginning date under Section 107 of the SECURE 2.0 Act, meaning he was 73 years old when he died.
Tax impact on final withdrawal
The final withdrawal will be taxed as ordinary income at her highest marginal tax bracket, adding to her salary.
Spreading withdrawals reduces tax
Taking smaller withdrawals over the 10-year period keeps more money in lower tax brackets than a single large withdrawal.
Steps to minimize tax
She should confirm her father's required beginning date, set up inherited IRA, mark the deadline, build a withdrawal schedule with a CPA, and set withholding.
Year 10 tax consequence
The final withdrawal will be taxed on top of her salary, pushing most of the $500,000 into her highest tax bracket.
The bottom line
Daughter of 54-year-old finance manager inherits $500,000 IRA but must take annual IRS withdrawals until year 10, risking higher taxes on final balance.
