If you leave a traditional IRA to your adult children or other non-spouse beneficiaries, they must withdraw every dollar from that account within 10 years of your death — and every withdrawal is taxed as ordinary income. Done carelessly, that forced distribution schedule can push your heirs into a higher tax bracket and cost them $47,000 or more in avoidable taxes on a mid-sized inherited account. The good news: with a little planning now, you can dramatically shrink that bill before it ever arrives.

What exactly is the 10-year rule for inherited IRAs?

Before 2020, beneficiaries who inherited an IRA could “stretch” distributions across their entire lifetime, keeping most of the money growing tax-deferred for decades. The SECURE Act of 2019 ended that strategy for most heirs. Now, any non-spouse beneficiary — think adult children, grandchildren, siblings, or friends — must drain the entire inherited IRA by December 31 of the tenth year following the original owner’s death.

There are a handful of exceptions. A surviving spouse can still treat an inherited IRA as their own. Minor children (until they reach the age of majority), disabled or chronically ill individuals, and beneficiaries who are less than 10 years younger than the deceased owner also qualify for the old stretch rules. But for the majority of heirs — especially working-age adult children — the 10-year clock starts ticking the moment you pass.

Why does this rule create such a large tax bill?

Here’s where the math gets painful. Imagine you leave a $300,000 traditional IRA to your 45-year-old daughter. She has 10 years to empty it. If she waits and pulls it all out in year 10, that $300,000 — plus a decade of growth, potentially pushing the balance to $400,000 or more — lands on her tax return as ordinary income in a single year. At current federal rates, that single distribution could be taxed at 24% to 32%, generating a federal tax bill of $96,000 to $128,000. Compare that to spreading smaller, strategic withdrawals across the 10 years in lower-tax years, and the difference easily reaches $47,000 or more.

The IRS clarified in 2024 that for accounts where the original owner had already reached their Required Minimum Distribution (RMD) age, heirs must also take annual distributions during those 10 years — not just clear out the account by year 10. Missing those annual RMDs now triggers a 25% penalty on the amount that should have been withdrawn. For 2025 and 2026, the RMD rules follow the SECURE 2.0 Act changes: the required beginning date is April 1 of the year after you turn 73.

How can you protect your heirs from this tax trap right now?

The single most powerful move is a Roth IRA conversion. When you convert money from a traditional IRA to a Roth IRA, you pay income tax on the converted amount now — but everything your heirs later inherit from a Roth grows and is distributed completely tax-free. The 10-year rule still applies to inherited Roth IRAs, but your heirs won’t owe a penny of federal income tax on those withdrawals. On a $300,000 account, that’s the difference between a five-figure tax bill and zero.

The smartest approach is to convert gradually, in amounts that keep you just below the threshold that would bump you into the next tax bracket — or, just as importantly, below the income level that triggers Medicare IRMAA surcharges (more on that in a moment).

A second strategy: talk to your heirs now. If they’re in lower-income years — perhaps they’re between jobs, semi-retired, or taking time off — those are the ideal years to take larger distributions from an inherited IRA and pay tax at a lower rate. A plan made today can guide them when the time comes.

This is also the moment to make sure your will, trust, and beneficiary forms tell the same story. RetireHub’s trust and will creation tool can help you organize the basics before you bring the plan to an estate attorney or tax professional.

How do Medicare IRMAA surcharges connect to inherited IRA withdrawals?

IRMAA stands for Income-Related Monthly Adjustment Amount. It’s a surcharge added to your Medicare Part B and Part D premiums if your income exceeds certain thresholds. In 2025, the standard Medicare Part B premium is $185 per month — but if your modified adjusted gross income exceeds $106,000 as a single filer (or $212,000 for married couples filing jointly), you start paying significantly more.

This matters for inherited IRA planning in two ways. First, if you’re doing Roth conversions to protect your heirs, large conversions in a single year can spike your own income and trigger IRMAA surcharges for yourself two years later (Medicare uses income from two years prior). Second, your working-age heirs won’t face IRMAA directly — but if they’re already collecting Social Security, large IRA distributions can make up to 85% of their Social Security benefit taxable. Coordinating the timing of withdrawals with a tax professional is worth every penny.

When should you claim Social Security if you’re also doing Roth conversions?

Delaying Social Security to age 70 maximises your monthly benefit — you earn roughly 8% more for every year you wait past your full retirement age (66 or 67 for most people today). But those years before you claim are also a golden window for Roth conversions. Your income is typically lower when you’re not yet drawing Social Security, which means conversions may be taxed at a lower rate and are less likely to trigger IRMAA surcharges.

If you’re between 62 and 70 and sitting on a sizeable traditional IRA, the years before you claim Social Security may be the most tax-efficient time you’ll ever have to convert. Run the numbers — or have an advisor run them — before you file for benefits.

What’s the simplest action to take this week?

Pull up your most recent IRA statement and write down the balance. Then estimate what your heirs’ income might look like over the next 10 years. If you have a traditional IRA worth more than $100,000 and adult children who are likely to be in the 22% bracket or higher, a Roth conversion strategy deserves serious attention before year-end. Tax laws can change, bracket thresholds adjust annually for inflation, and the window to act is always smaller than it looks.

You’ve spent decades building this money. A few smart moves now can make sure your heirs keep as much of it as possible.

FAQ

Frequently Asked Questions

What are the RMD rules for 2025 and 2026 under the SECURE 2.0 Act?

Under SECURE 2.0, the required minimum distribution (RMD) starting age is now 73 for anyone born between 1951 and 1959, and 75 for those born in 1960 or later. You must take your first RMD by April 1 of the year after you reach your required beginning age. Heirs of accounts where the original owner had already begun RMDs must also take annual distributions during the 10-year payout window, not just empty the account by year 10.

When should I claim Social Security to maximise my benefit?

Waiting until age 70 to claim Social Security gives you the largest possible monthly benefit — approximately 24–32% more than claiming at full retirement age (66 or 67), and up to 77% more than claiming at 62. If you’re in good health and have other income sources to live on, delaying is usually the mathematically superior choice. The break-even point compared to early claiming is typically around age 80–82.

How much of my Social Security benefit is taxable?

Between 0% and 85% of your Social Security benefit can be taxable, depending on your “combined income” (adjusted gross income plus non-taxable interest plus half your Social Security benefit). Single filers with combined income above $34,000 pay tax on up to 85% of their benefit; the threshold is $44,000 for married couples filing jointly. Large IRA withdrawals or Roth conversions can push you into the higher taxation zone.

What is the Medicare Part B premium for 2025?

The standard Medicare Part B premium for 2025 is $185.00 per month, up from $174.70 in 2024. However, if your modified adjusted gross income (MAGI) from two years prior exceeded $106,000 as a single filer or $212,000 for married couples filing jointly, you’ll pay an IRMAA surcharge on top of that standard amount, which can add hundreds of dollars per month to your Medicare costs.

How do I avoid Medicare IRMAA surcharges?

IRMAA surcharges are based on your income from two years prior, so planning ahead is essential. Keep your modified adjusted gross income below the threshold brackets by spacing out Roth conversions, timing IRA withdrawals carefully, and using strategies like qualified charitable distributions (QCDs) to satisfy RMDs without adding to your taxable income. If your income drops significantly due to a life event like retirement or divorce, you can appeal your IRMAA determination directly with the Social Security Administration.