SECURE Act Forces 10-Year IRA Payouts, Exposing Heirs to 25% Penalties
Updated
Updated · Daily Herald · Jul 17
SECURE Act Forces 10-Year IRA Payouts, Exposing Heirs to 25% Penalties
3 articles · Updated · Daily Herald · Jul 17
Summary
Starting in 2025, most adult children who inherit a traditional IRA must drain the account within 10 years, and many must also take annual withdrawals in years one through nine.
Those yearly payouts apply when the original owner had already begun required minimum distributions, and missing one can trigger a penalty of up to 25% of the amount that should have been withdrawn.
A $600,000 inherited IRA spread over 10 years can add more than $60,000 a year to a beneficiary’s taxable income, potentially pushing heirs in peak earning years into higher federal brackets and adding state tax.
Planners say the main way to blunt the hit is acting before death—especially through Roth conversions—because inherited Roth IRAs still face the 10-year rule but can be withdrawn tax-free.