How to use this calculator
Enter your IRA balance, the tax rate you expect to pay in retirement, how many heirs will inherit the account and the rate you expect them to pay. The calculator estimates the tax you will pay on required minimum distributions over your lifetime, the tax your heirs will pay when they empty the account, and the two added together as a single Family Tax Rate.
Change one input at a time. The heirs' tax rate is usually the input with the largest effect, because children often inherit during their highest-earning years.
What a Family Tax Rate is
Most retirement planning looks at one tax rate: yours. A traditional IRA is never taxed only once, though. You pay income tax on what you withdraw, and whoever inherits the balance pays income tax on the rest. The Family Tax Rate adds both together and divides by the account balance, so you can see the whole bill as one number.
The number matters because the two rates are often very different. A retiree in the 22% bracket can leave an account to a child who is in the 32% bracket and still working. The part the child inherits is taxed at the higher of the two rates.
The 10-year rule changed the math
Before 2020, a non-spouse beneficiary could take distributions from an inherited IRA over their own life expectancy. That is the arrangement people still call the stretch IRA, and it spread the tax over decades.
The SECURE Act ended it for most non-spouse beneficiaries. They now have to empty the account within 10 years of the original owner's death. The same balance is taxed over 10 years instead of 30 or 40, which pushes the heir into higher brackets while they are still earning.
- Surviving spouses are not subject to the 10-year rule and have their own options.
- A minor child of the account owner, a disabled or chronically ill beneficiary, and a beneficiary not more than 10 years younger than the owner are also treated differently.
- Everyone else - adult children, grandchildren, nieces, nephews - generally has 10 years.
Why the heirs' side is usually the bigger number
A withdrawal from an inherited traditional IRA is ordinary income to the beneficiary in the year they take it. Taking the whole balance at once can push a single year of income through several brackets, which is why the result is often larger than people expect.
Splitting the account between more heirs usually lowers the total, because each person reports a smaller amount. Change the number of heirs and watch the heirs' tax line move.
What a Roth conversion changes
Converting part of a traditional IRA to a Roth means paying tax now, at your rate, on the amount you convert. In return the converted money grows tax-free, has no required minimum distributions during your lifetime, and passes to your heirs tax-free. Heirs still have to empty an inherited Roth within 10 years, but the distributions are generally not taxable to them.
A conversion is worth modelling whenever your current rate is lower than the rate you expect your heirs to pay. Model it against the Medicare surcharge too: a large conversion can raise your income enough to trigger IRMAA two years later.
Frequently asked questions
What tax rate will my heirs pay on an inherited IRA?
Their own ordinary income rate, applied to each distribution in the year they take it. There is no special inherited-IRA rate. Because most beneficiaries inherit in their 40s or 50s while still working, their rate is often higher than the retiree's. That is why the calculator asks for it separately.
What is the tax on an inherited IRA taken as a lump sum?
The full balance is added to the beneficiary's ordinary income for that one year. On a large account that moves income through several brackets at once, so the effective rate on a lump sum is usually higher than the heir's normal bracket. Spreading withdrawals across the 10 years almost always costs less in total tax.
Does the 10-year rule require a withdrawal every year?
It depends on whether the original owner had already begun required minimum distributions. If they had, annual distributions are generally required during the 10 years as well as emptying the account by year 10. If they had not, the beneficiary can take nothing until year 10 and then withdraw the whole balance - which leaves more room to plan, and more risk of one very large taxable year.
Do inherited Roth IRAs have the same problem?
Not the same one. An inherited Roth is still subject to the 10-year rule, so the account still has to be emptied. The distributions are generally tax-free to the beneficiary, which is the whole point of the comparison this calculator runs.
Is naming a trust a way around this?
Usually not for income tax. A trust named as IRA beneficiary is still subject to the 10-year rule in most cases, and trusts reach the top federal income tax bracket at a very low income level, so income kept inside the trust can be taxed harder than it would be in the heir's hands. Trusts solve control and protection problems, not the tax problem this calculator measures.
How accurate is the estimate?
It is a planning estimate, not a tax return. It applies a flat rate you supply rather than running real brackets year by year, assumes a steady rate of return, and does not model state income tax unless you tick that box, the taxation of Social Security, or the Medicare IRMAA surcharge. Use it to see the size of the problem and the direction a conversion moves it.
Keep reading
- Roth conversion calculator: what a conversion would cost
- IRMAA calculator: would a conversion raise your Medicare premiums?
- Learning Center: retirement accounts and the rules that govern them
- All free calculators
This calculator gives estimates for education only. It is not personalized financial, tax or legal advice. Check your numbers with a qualified professional before you make a decision.