Do you have to withdraw from an inherited IRA every year?

Ten years isn’t the whole rule

If you inherited an IRA from a parent, someone has probably told you that you have ten years. For most adult children, that’s true: an inherited IRA has to be emptied within ten years. But there’s a second rule that decides whether you can actually wait that long, or whether you also have to take money out every year along the way.

It depends on what your parent was already doing

Whether you have to take money out every year depends on one thing: had your parent already started taking their required yearly withdrawals?

• If they hadn’t started, there’s no yearly minimum. You just have to empty the account by the end of the tenth year.
• If they had already started, then yes, you have to take money out every year and empty what’s left by year ten.

So the first step is finding out where your parent stood before they passed. That one answer tells you which set of rules you’re working with.

Waiting until the last year has a cost

Even when there’s no yearly minimum, waiting until the end can cost you. If you leave everything in the account until the last year, all that money gets taxed in one year, and that can push you into a higher tax bracket.

Spreading withdrawals over several years can keep more of the money out of the higher brackets. How much to take each year depends on your other income, so it helps to look at the full ten years together instead of one year at a time.

How we handle it

At Sansone CPA & Financial, we coordinate your tax, investment, and retirement decisions so withdrawals from an inherited IRA are planned around the rest of your income. That starts with retirement income planning in Crystal Lake, IL built around your tax return.