Quick Read – The SECURE Act forces heirs to drain inherited traditional IRAs within 10 years, often triggering 32%+ federal tax rates during their peak earning years. – Retirees should convert traditional IRA funds to a Roth between retirement and age 73, when income is lowest…
d before RMDs force taxable withdrawals. – Boomers averaging $257,002 in IRA balances who simply spend the traditional account first and leave the Roth to heirs capture most inheritance tax benefits at zero extra cost. – The order in which retirees draw down their accounts often reverses the most efficient plan for the next generation. A common instinct is to leave the traditional IRA untouched because the Roth has already grown tax-free and feels like the “bonus” account
The tax code rewards the opposite behavior. Spending the traditional IRA during retirement and leaving the Roth to heirs tends to leave more after-tax wealth on both sides of the transfer. Two federal rule changes shape this calculation.
The SECURE Act ended the stretch IRA for most non-spouse beneficiaries, requiring inherited traditional IRAs to be fully distributed within 10 years. Those distributions are taxed as ordinary income to the heir, often during their highest-earning years. Inherited Roth IRAs are also subject to the 10-year rule, but withdrawals come out tax-free, and the balance can compound tax-free for the entire decade before being emptied.