Leave the Kids the Roth, Spend the IRA Yourself: The Inheritance Order Most Families Get Backward.

Leave the Kids the Roth, Spend the IRA Yourself: The Inheritance Order Most Families Get Backward.

David Beren

Wed, August 26, 2026 at 3:42 PM GMT+3 5 min read

Quick Read

• Retirees should spend their traditional IRA first, since heirs forced to empty inherited accounts within 10 years often pay 32% tax versus a retiree's 12%.

• Early retirees have nearly a decade before RMDs begin at 73, a prime window to draw down traditional IRA funds at lower tax rates.

• Roth IRAs carry no lifetime RMDs and pass to heirs tax-free, making every dollar of compounded growth free of federal income tax upon inheritance.

• Read More: Learn 7 secret wealth tips high net worth investors use that most investors miss (sponsor)

Retirees often carry both a traditional IRA and a Roth IRA into their sixties, and the order in which they draw down those accounts shapes both their tax bill and what their children eventually receive. Published tax rules and inherited-account guidance point to a sequence many families reverse: spend the traditional IRA first and leave the Roth IRA alone.

Two Buckets, Two Very Different Tax Bills

Traditional IRAs are funded with pre‑tax dollars, which means the IRS treats every withdrawal as ordinary income, whether the money comes out during the owner's lifetime or after they pass. Roth IRAs work the opposite way. They are funded with after‑tax dollars, so qualified distributions come out completely tax‑free, both for the original account holder and for anyone who inherits the account down the line.

Under current rules, most non-spouse beneficiaries must empty an inherited IRA within 10 years. That compression matters more for traditional accounts because the withdrawn balance stacks on top of the heir's existing wages, often during peak earning years. Clark Howard framed the split on his podcast, calling a Roth "a great asset to inherit" and a traditional IRA "an ugly asset to inherit."

Where Bracket Math Favors the Parent

For 2025, the IRS sets the 22% bracket for single filers between $48,476 and $103,350, and the 24% bracket runs to $197,300. Married couples filing jointly reach the 24% bracket at $206,701 and the 32% bracket at $394,601.

What Happens After A $1,000,000 Retirement?

How do you continue to grow a seven-figure portfolio in retirement? The last thing you want is to run out of money, you want your money to generate lasting income while you enjoy your life.

Learn seven strategies high net worth investors use with new report: The Seven Secrets of High Net Worth Investors from Fisher Investments. Get your guide here (sponsor)

A retiree with no wages and moderate Social Security income often sits well below those thresholds. An adult child in peak earning years, forced to take large distributions within a 10-year window, frequently does not. Identical $50,000 withdrawals can be taxed at 12% for the parent and 32% for the working-age heir. The account balance is the same. The tax outcome depends entirely on who takes the money out and when.

Nine Years Between the Last Paycheck and the First RMD

Required Minimum Distributions on traditional IRAs begin at age 73. A retiree who leaves the workforce in her early sixties has close to a decade of low-income years before those forced withdrawals arrive. Drawing from the traditional IRA during that window fills up the lower brackets voluntarily and shrinks the future RMD, which reduces the balance a beneficiary would otherwise inherit at ordinary income rates (we walked through how to defuse that first-year RMD tax bill years before it lands in a free guide here: The First-Year Tax Bomb).

A caller on the Clark Howard podcast, Dave from Detroit, raised the same point in reverse: why convert to a Roth before RMDs when the same effect comes from simply spending the traditional IRA while delaying Social Security to age 70? Each year Social Security is postponed past full retirement age adds roughly 8% to the eventual benefit, and the 2027 cost-of-living adjustment is currently tracking toward 3.1%. Traditional IRA withdrawals fund the interim while the future check compounds.

Why the Roth Belongs at the Back of the Line

Roth IRAs come with a distinct advantage that traditional accounts lack. The original owner faces no required minimum distributions during their lifetime. If you leave the money alone, the entire balance keeps growing tax‑free for as long as you live. A child who inherits that account still has to empty it within a decade, but they receive every dollar without any federal tax obligation attached.

With the 10‑year Treasury yield sitting at 4.7% and hovering near the high end of its recent range, even a conservative Roth portfolio can generate substantial growth over a retiree's remaining years. And every single dollar of that appreciation passes to your beneficiaries completely free of federal income tax, assuming the account has been open for at least five years.

Reordering the Withdrawal Sequence

Conventional guidance to spend taxable accounts first, then tax-deferred, then Roth still holds as a general default. The refinement sits inside the tax-deferred layer: pull from the traditional IRA aggressively during low-bracket years, particularly before RMDs and Social Security begin. Let the Roth ride.

Three practical steps follow from the data:

1. Taxable income can be mapped for each year between retirement and age 73, identifying how much room remains inside the 12% and 22% brackets before hitting 24%.

2. Traditional IRA funds drawn up to those bracket ceilings cover living expenses, with Social Security claims delayed where cash flow allows.

3. Individual beneficiaries named on the Roth IRA, with those funds left for last, allow a working-age heir to receive ten years of tax-free distributions.

Families often default to spending the Roth first because it feels free and preserving the traditional IRA because it feels larger. Under current bracket math and inherited IRA rules, the opposite sequence generally produces a lower combined tax bill.

What Happens After A $1,000,000 Retirement?

How do you continue to grow a seven-figure portfolio in retirement? The last thing you want is to run out of money, you want your money to generate lasting income while you enjoy your life.

Learn seven strategies high net worth investors use with new report: The Seven Secrets of High Net Worth Investors from Fisher Investments. Get your guide here (sponsor)

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