A $1.8 million inherited IRA requires careful withdrawal timing to avoid pushing distributions into higher tax brackets.
A 56-year-old hospital operations director inherited a $1.8 million traditional IRA from her father, triggering IRS rules requiring full distribution within 10 years. With annual income of $260,000, spreading withdrawals evenly risks pushing distributions into the 35% tax bracket, costing an estimated $480,000 in additional federal taxes.
Under SECURE Act regulations, non-spouse beneficiaries inheriting from an owner who had begun required minimum distributions (RMDs) must drain the account by the 10th year. The beneficiary plans to retire at 63, when her income is expected to drop significantly, allowing withdrawals at a lower 24% tax rate.
Tax planners recommend taking only RMDs while working, then aggressively withdrawing remaining funds post-retirement to minimize tax liability. The IRS does not require annual distributions but mandates full depletion by year 10.