Inherit a Parent’s $220,000 IRA at 58 and Spread It Over Ten Years at 22%. Cash It Out the First Year Like Most Heirs Do, and on a $90,000 Salary About $90,000 of It Lands at 32% and 35%

Quick Read

• Spreading a $220,000 inherited IRA over 10 equal withdrawals keeps all distributions taxed at 22%, costing $48,400 in federal tax.

• Taking the full $220,000 in year one pushes taxable income to $293,900, sending $92,125 into the 32 to 35 percent brackets and costing $12,264 more.

• Missing the 10-year deadline triggers an IRS excise tax penalty on any remaining balance, adding another layer of cost beyond income tax.

• Read More: Avoid these 13 retirement mistakes before they derail your future (sponsor)

Imagine a 58-year-old single filer earning $90,000 who inherits a $220,000 tax-deferred retirement account from a parent. The federal tax bill on that inheritance depends on how and when the money comes out.

You can withdraw the money in equal pieces over ten years or all at once in the first year, and the two choices produce very different tax bills. The figures below use the IRS brackets and standard deduction for tax year 2026, which apply to returns filed in 2027.

How the 10-Year Rule Sets the Withdrawal Clock

For IRA owners who died in a tax year beginning after December 31, 2019, IRS Publication 590-B says all distributions must be made by the end of the 10th year after death, with exceptions for certain qualifying beneficiaries.

That exception generally doesn’t cover adult children, so the account must be emptied by December 31 of the year containing the 10th anniversary of the parent’s death. In the IRS example, an owner who died in 2025 leaves an heir who must finish by December 31, 2035.

The heir decides how to pace the withdrawals inside that window. The IRS notes that beneficiaries can take a lump-sum distribution of the inherited account at any time.

Being 58 does not trigger the early withdrawal penalty here, because the tax code exempts distributions made to a beneficiary (or to the estate of the employee) on or after the death of the employee. That leaves regular income tax as the only federal cost, and its size depends on timing.

——

Learn 13 Major Retirement Mistakes and Ways To Avoid Them

One investment mistake could create big risks for your retirement. Many investors make the same critical errors: being too conservative, making big bets on “sure things,” or paying excessive fees. Any of those blunders can endanger your hard-earned savings.

Now you can learn the mistakes even experienced investors make (and ways you can sidestep them before it’s too late) with this new guide: 13 Retirement Mistakes and How to Avoid Them from Fisher Investments. Access your complimentary copy here (sponsor)

——

Where a $90,000 Earner Starts Before Any Withdrawal

The 2026 standard deduction for single filers is $16,100. Subtracting it from a $90,000 salary leaves $73,900 of taxable income.

The 22% rate applies to income over $50,400, and the 24% rate begins above $105,700. That puts this earner in the lower bracket, with some room before the next rate kicks in.

Spreading Withdrawals Over Ten Years Keeps Them at 22%

Equal withdrawals over ten years total $22,000 per year. Taxable income rises to $95,900, still below the 24% threshold, leaving $9,800 of space. Each year’s withdrawal adds $4,840 in federal tax, for a ten-year total of $48,400.

This version holds the balance flat and keeps 2026 brackets fixed. In practice, investment growth would increase each withdrawal, while annual inflation adjustments usually push the bracket thresholds higher. A raise at work would also use up some of the remaining 22% room.

Cashing Out in Year One Pushes $92,125 Into the 32% and 35% Brackets

Taking the full $220,000 in a single year puts taxable income at $293,900.

For 2026, the 32% rate starts above $201,775, and the 35% rate starts above $256,225.

As a result, the top two rates tax $92,125 of the inheritance.

Taken together, these portions produce about $60,664 in federal tax on the inheritance, or roughly 27.6% of the account. That is about $12,264 more than the ten-year schedule. The difference comes from bracket structure alone, since each withdrawal method taxes the same $220,000 of income.

Factors That Can Change These Numbers

Whether the parent had started required minimum distributions matters. Publication 590-B states that if the owner died before their required beginning date and the 10-year rule applies, no distribution is required for any year before the 10th year.

Parents who had already begun distributions can leave heirs with a different annual schedule. The IRS suggests that heirs check the IRA plan documents or consult with the IRA custodian or trustee for the details.

Missing the deadline has its own cost. Any amount left after December 31 of the 10th-anniversary year is subject to the excise tax described in the publication. The penalty charge is one of several IRS rules that quietly drain inherited retirement accounts, and we mapped the rest in a free guide to retirement tax traps.

Filing status also changes the result. For married couples filing jointly, the 32% rate doesn’t begin until income exceeds $403,550, so the same lump sum would fall into lower brackets. State income taxes, which this federal comparison leaves out, would add to either scenario.

Looking ahead, the main variables are the annual inflation adjustments to bracket thresholds, changes in the heir’s salary over the decade, and investment returns inside the account. Each one affects how much of a given year’s withdrawal fits under the 24% line. With a ten-year window, the comparison shifts every time one of those factors changes.

Help Avoid These 13 Retirement Mistakes Before They Derail Your Future

One investment mistake could create big risks for your retirement. Many investors make the same critical errors: being too conservative, making big bets on “sure things,” or paying excessive fees. Any of those blunders can endanger your hard-earned savings.

Now you can learn the mistakes even experienced investors make (and ways you can sidestep them before it’s too late) with this new guide: 13 Retirement Mistakes and How to Avoid Them from Fisher Investments. (sponsor)

Contact editorial@247wallst.com for any questions or corrections.