Quick Read – Retirees should spend their traditional IRA first, since heirs forced to empty inherited accounts within 10 years often pay 32% tax versus a retiree’s 12%. – Early retirees have nearly a decade before RMDs begin at 73, a prime window to draw down traditional IRA…
nds at lower tax rates. – Roth IRAs carry no lifetime RMDs and pass to heirs tax-free, making every dollar of compounded growth free of federal income tax upon inheritance. – Retirees often carry both a traditional IRA and a Roth IRA into their sixties, and the order in which they draw down those accounts shapes both their tax bill and what their children eventually receive. Published tax rules and inherited-account guidance point to a sequence many families reverse: spend the traditional IRA first and leave the Roth IRA alone
Two Buckets, Two Very Different Tax Bills Traditional IRAs are funded with pre‑tax dollars, which means the IRS treats every withdrawal as ordinary income, whether the money comes out during the owner’s lifetime or after they pass. Roth IRAs work the opposite way. They are funded with after‑tax dollars, so qualified distributions come out completely tax‑free, both for the original account holder and for anyone who inherits the account down the line.
Under current rules, most non-spouse beneficiaries must empty an inherited IRA within 10 years. That compression matters more for traditional accounts because the withdrawn balance stacks on top of the heir’s existing wages, often during peak earning years. Clark Howard framed the split on his podcast, calling a Roth “a great asset to inherit” and a traditional IRA “an ugly asset to inherit.” Where Bracket Math Favors the Parent For 2025, the IRS sets the 22% bracket for single filers between $48,476 and $103,350, and the 24% bracket runs to $197,300.