Should You Empty an Inherited Roth or Traditional IRA First? (w/Examples) + FAQs

This article reflects federal rules as of June 2026 and covers tax years 2025 and 2026. State rules vary and are noted separately. Tax law changes often — confirm current figures with the IRS or a licensed professional before you act.

Quick Answer

Empty the inherited Traditional IRA first and save the inherited Roth IRA for last. Traditional IRA withdrawals are taxed as ordinary income, so spreading them across your 10-year window keeps you in lower brackets. The Roth grows tax-free, so let it compound and withdraw it tax-free at the end.

When you inherit both a Traditional and a Roth IRA, you are not choosing whether to take the money — the law forces you to empty both within 10 years. You are choosing the order and pace, and that single choice can swing your total tax bill by thousands of dollars over the decade. Drain the Traditional account too fast and you push yourself into a higher bracket; ignore the Roth’s tax-free growth and you waste its biggest advantage.

The stakes are real and the clock is loud. Roughly $2.5 trillion sits in IRAs that will pass to heirs in the coming wave of wealth transfer, and starting in 2025 many heirs must take annual withdrawals or face a penalty of up to 25%. Get the sequence right and you keep more of what your loved one left you.

Here is what you will learn:

🧭 Why the Traditional-first, Roth-last rule fits most heirs — and the cases where it flips
🧮 A fully worked 10-year example with real 2026 tax-bracket math
⏰ The 2025 annual-RMD trap and the 25% penalty that can drop to 10%
👥 Three named scenarios showing the strategy in action
🏛️ How your state may tax these withdrawals even when timing is perfect

The Core Problem: Two Inherited Accounts, One 10-Year Clock

When you inherit an IRA from someone who was not your spouse and who died in 2020 or later, you usually fall under the 10-year rule created by the SECURE Act. The rule says the entire inherited account must be emptied by December 31 of the tenth year after the year the original owner died. The final IRS regulations, released in 2024, locked in how this works.

The 10-year rule applies to both a Traditional and a Roth inherited IRA, but the tax effect is completely different. A withdrawal from an inherited Traditional IRA is taxed as ordinary income in the year you take it, stacking on top of your wages. A withdrawal from an inherited Roth IRA is almost always tax-free, because the original owner already paid tax on that money. The consequence of missing this difference is steep: empty the Traditional account in one large lump and you can jump two tax brackets in a single year.

There is a second layer that trips up many heirs. Because the original owner already paid tax on Roth contributions, the IRS does not force annual withdrawals from an inherited Roth during the 10 years — only the full balance by year 10. A misconception here is that “no annual requirement” means “leave it alone forever.” It does not. The consequence of forgetting is that the full Roth balance becomes due in year 10, and your next step should be a calendar reminder for the final-year deadline so the tax-free money is not stranded.

The Traditional account often does carry an annual withdrawal requirement, and that is the rule that changed for 2025. Below, each piece is broken out so you can see what applies to you, what happens if you ignore it, and what to do about it.

Why Traditional-First, Roth-Last Wins for Most Heirs

The math behind the default strategy is simple once you see it. You want to pull the taxable money out slowly, across as many low-bracket years as possible, and let the tax-free money keep growing untouched until the last possible moment.

Stretch the taxable account over more years

Spreading inherited Traditional IRA withdrawals across all 10 years means each year’s slice is smaller. A smaller slice is more likely to stay inside your current bracket instead of spilling into the next one. The consequence of dumping it all in year 10 is brutal: a $400,000 account taken at once could push a married couple from the 22% bracket into the 32% or 35% bracket for that year. The fix is to start withdrawing in year one, even if no annual minimum is required, and aim to “fill” your low brackets each year.

Let the Roth compound tax-free

Every dollar left inside an inherited Roth keeps growing without tax. If the Roth earns 7% a year for nine years before you withdraw it, that growth is yours tax-free. The consequence of emptying the Roth early is that you trade away years of tax-free compounding for no benefit, since the Roth withdrawal would not have raised your tax bill anyway. The right move is to withdraw the Roth last — ideally in year 10.

Use the Roth as a tax-free “safety valve”

Because Roth withdrawals never raise your taxable income, you can tap the Roth in a high-income year without tax consequences. A common mistake is treating both accounts as identical and withdrawing equal amounts each year. The smarter approach is to lean on the Traditional account in low-income years and reserve the Roth for years when extra income would cost you dearly.

When the Default Flips: Empty the Roth First Instead

The Traditional-first rule is the strong default, but it is not universal. There are real situations where drawing the Roth sooner — or evenly — makes sense.

You expect much higher future income or tax rates

If you are early in your career and expect your income to rise sharply, your future brackets may be higher than today’s. Pulling more Traditional income now, while your rate is low, can beat waiting. The Roth still comes out last, but the point is to accelerate Traditional withdrawals, not delay them.

The Roth fails the 5-year rule

An inherited Roth’s earnings are tax-free only if the account has met the 5-year holding rule. Contributions and converted amounts come out tax-free regardless, but earnings withdrawn before the account is five years old can be taxable. If the original owner opened the Roth recently, waiting until the 5-year clock is met protects the earnings — another reason Roth-last usually still wins.

You simply need the cash

If you need money now, take it from the account that costs you the least in tax — the Roth. A tax-free Roth withdrawal beats a taxable Traditional one when your only goal is spending. The consequence of reflexively pulling from the Traditional account for spending is an avoidable tax bill.

Which Situation Applies to You?

The right sequence depends on who you are to the deceased and when they died. Use this to find your path before running any numbers.

You are the surviving spouse: You have the most flexibility. You can roll the IRA into your own, treat it as your own, or keep it as inherited. The 10-year rule may not apply at all, so the sequencing strategy below is optional for you.
You are a non-spouse who is not an eligible beneficiary (most adult children): The 10-year rule applies. The Traditional-first, Roth-last strategy is built for you.
You are an eligible designated beneficiary (a minor child of the owner, disabled, chronically ill, or less than 10 years younger): You may still “stretch” withdrawals over your life expectancy, which changes the math.
The owner died before their required beginning date: You likely owe no annual Traditional RMDs during the 10 years — only the full balance by year 10. This gives you maximum freedom to time withdrawals.
The owner died on or after their required beginning date: You must take annual RMDs from the inherited Traditional IRA in years one through nine, plus empty it by year 10.

The 2025 Annual-RMD Trap (and the Penalty That Follows)

For years, heirs assumed the 10-year rule meant “take nothing until year 10.” The IRS’s final 2024 rules ended that assumption for one group, and 2025 was the first year it bit.

If you inherited a Traditional IRA from someone who died on or after their required beginning date (the age they had to start their own RMDs), you must take an annual required minimum distribution in each of years one through nine — and still empty the account by year 10. The CNBC report confirms 2025 was the first enforcement year, with annual withdrawals due by December 31 each year. Inherited Roth IRAs have no such annual requirement, since the original Roth owner never had RMDs.

The penalty for missing an RMD is an excise tax under IRC §4974. It is 25% of the amount you failed to withdraw. The good news, confirmed by Wolters Kluwer, is that the penalty drops to 10% if you correct the shortfall within a two-year correction window. You fix it by withdrawing the missed amount and filing Form 5329 with your return. A common misconception is that the penalty is unavoidable; in reality, the IRS often waives it entirely for reasonable cause if you act promptly and attach an explanation.

What to do about it: confirm whether the owner had reached their required beginning date, calculate any annual RMD using the IRS Single Life Expectancy table, and set a recurring December reminder so you never miss a year.

Three Common Scenarios

Below are the three situations heirs face most often, each shown as a two-column table of choice and outcome.

Scenario 1: Owner died before their required beginning date

Your Withdrawal Choice	What Happens
Take nothing for years 1–9, empty both in year 10	Legal, but the Traditional lump in year 10 can spike you into a high bracket and waste years of bracket-filling
Withdraw the Traditional evenly across years 1–10, Roth in year 10	Each Traditional slice stays small, the Roth compounds tax-free, and your total 10-year tax is usually lowest
Empty the Roth first, hold the Traditional to year 10	You lose tax-free Roth growth and still face a big taxable lump later — the weakest plan

Scenario 2: Owner died on or after their required beginning date

Your Withdrawal Choice	What Happens
Skip the required annual Traditional RMD	A 25% excise tax on the shortfall, reducible to 10% if corrected within two years via Form 5329
Take only the minimum required each year	Compliant, but may leave a large taxable balance forcing a high-bracket year 10
Take the RMD plus extra Traditional in low-income years	Smooths income, fills low brackets, and shrinks the year-10 lump

Scenario 3: You need cash during the 10 years

Your Withdrawal Choice	What Happens
Pull spending money from the Traditional IRA	Every dollar is taxed as ordinary income, raising your bracket
Pull spending money from the Roth IRA	Tax-free (if the 5-year rule is met), with no effect on your bracket
Mix: cover RMDs from Traditional, extra needs from Roth	Meets the rules while keeping taxable income as low as possible

A Fully Worked Example (2026 Tax-Bracket Math)

Meet Maria and David Chen, a married couple filing jointly with about $90,000 of taxable income before any inherited IRA money. In 2026, the 22% bracket for joint filers runs from $100,800 up to $211,400. That means they have roughly $121,400 of “room” left inside the 22% bracket each year before hitting the 24% rate.

Maria inherits a $300,000 Traditional IRA and a $200,000 Roth IRA from her late father, who died before his required beginning date. She has two realistic paths.

Path A — Dump it all in year 10. Maria lets the Traditional grow to about $440,000 (7% for nine years) and withdraws it in one year. Stacked on $90,000 of other income, roughly $121,400 fills the 22% bracket, the next chunk to $394,600 is taxed at 24%, and the top slice spills into the 32% bracket. A large piece of her inheritance is taxed at 32% — a rate she never needed to touch.

Path B — Spread the Traditional, Roth last. Maria withdraws about $40,000 of Traditional each year for 10 years. Added to her $90,000, her income reaches roughly $130,000 — comfortably inside the 22% bracket every single year. None of the Traditional money is taxed above 22%. In year 10 she withdraws the entire Roth, now grown to about $368,000, completely tax-free.

The difference is stark: under Path B, none of Maria’s withdrawals are taxed above 22%, while Path A pushes a large slice to 32%. On several hundred thousand dollars, that 10-percentage-point gap is tens of thousands of dollars in avoidable tax. Same inheritance, same law — only the sequence changed.

Named Examples

James, age 34, rising earner. James inherits a Traditional and a Roth IRA from his mother. His income is modest now but climbing fast. He accelerates Traditional withdrawals in his low-bracket early years, paying 12% and 22% now rather than a likely higher rate later, and saves the Roth for year 10. He pays tax on the Traditional while it is cheap and keeps the Roth growing tax-free.

Linda, age 61, low-income gap year. Linda retired but has not yet started Social Security, creating a few years of unusually low income. She front-loads large Traditional withdrawals during these gap years to fill her 10% and 12% brackets, then leans on the tax-free Roth once her Social Security and other income resume. Her timing turns a low-income window into a tax-saving opportunity.

Robert, age 47, needs $25,000 now. Robert wants to renovate his home. Instead of pulling from the Traditional account and adding $25,000 of taxable income, he takes it from the inherited Roth tax-free, leaving his bracket untouched. He still empties the Traditional steadily over the decade for long-term tax control.

Mistakes to Avoid

Skipping a required annual Traditional RMD. Outcome: a 25% excise tax on the shortfall, only reducible to 10% if you correct it within two years.
Emptying the Roth first. Outcome: you forfeit years of tax-free compounding for no tax benefit.
Waiting until year 10 to touch the Traditional. Outcome: a single huge taxable year that can cost you two extra brackets.
Assuming the inherited Roth never needs to be withdrawn. Outcome: the full balance becomes due by year 10, and missing it strands tax-free money.
Treating both accounts the same. Outcome: you waste low-bracket years and pay more tax than needed.
Forgetting the Roth 5-year rule. Outcome: withdrawn earnings on a young Roth can be taxable.
Ignoring your state’s tax treatment. Outcome: a withdrawal timed perfectly for federal tax can still trigger a state bill.
Rolling an inherited non-spouse IRA into your own. Outcome: this is not allowed and can be treated as a fully taxable distribution.

Do’s and Don’ts

Do’s

Do start Traditional withdrawals early — spreading income across years keeps you in lower brackets.
Do save the Roth for last — tax-free growth is its single greatest advantage.
Do track your required beginning date status — it decides whether annual RMDs apply.
Do file Form 5329 promptly if you miss an RMD — it can cut the penalty to 10% or zero.
Do check your state’s rules — federal timing alone does not control your full tax bill.

Don’ts

Don’t empty the Roth early — you would surrender tax-free compounding for nothing.
Don’t ignore the year-10 deadline — missing it on a Roth wastes tax-free dollars.
Don’t take it all in one year — bracket spikes are the most expensive mistake.
Don’t assume your state follows federal law — conformity genuinely varies.
Don’t go it alone on large balances — a CPA can model the full 10-year tax curve.

Pros and Cons of the Traditional-First, Roth-Last Strategy

Pros

Lower lifetime tax — spreading Traditional income avoids high-bracket spikes.
Maximum tax-free growth — the Roth compounds untouched for nearly a decade.
Flexibility — the Roth becomes a tax-free reserve for high-income years.
Bracket control — you can “fill” low brackets in retirement or gap years.
Penalty avoidance — steady withdrawals make it easy to meet annual RMDs.

Cons

Requires discipline — you must withdraw yearly, not procrastinate.
Market risk — a downturn in year 10 could hit a larger Roth balance.
Annual recordkeeping — you must track RMDs and the 10-year deadline.
Not one-size-fits-all — rising future income can argue for faster Traditional withdrawals.
State complexity — your home state may tax the income regardless of timing.

Federal vs. State Treatment

Your federal sequence can be perfect and your state can still surprise you. Always separate the two.

Federal Rule	State Reality
Inherited Traditional IRA withdrawals are ordinary income; Roth withdrawals are generally tax-free	Most states tax Traditional withdrawals as income too, but nine states have no income tax, so withdrawals are state-tax-free there
The 10-year rule and 25% RMD penalty are federal	States do not impose their own RMD penalty, but they tax the income you withdraw
Roth withdrawals are federally tax-free	Nearly all states also exempt qualified Roth withdrawals, mirroring federal treatment

States with no income tax — including Florida, Texas, Tennessee, Nevada, Washington, Wyoming, South Dakota, Alaska, and New Hampshire (on wages) — let inherited Traditional withdrawals escape state tax entirely. In states with an income tax, your Traditional withdrawals usually add to your state taxable income, so the same bracket-spreading logic applies at the state level. Confirm your state’s treatment on your state Department of Revenue website before timing a large withdrawal.

When to Call a Professional

This article is educational and is not a substitute for advice tailored to your situation. Most heirs with modest balances and a clear status can run the strategy themselves. But the math gets complex fast, and the cost of a wrong move is real.

Bring in a CPA or tax advisor if your inherited balances are large (six figures or more), if you are unsure whether the owner had reached their required beginning date, if a trust is the beneficiary, or if you are an eligible designated beneficiary weighing the life-expectancy stretch. A one-time planning engagement typically costs a few hundred to a couple thousand dollars and often pays for itself many times over in avoided tax. An estate attorney is worth it when a trust, multiple beneficiaries, or contested inheritance is involved.

What to Do Next

Identify your beneficiary type — spouse, non-spouse, or eligible designated beneficiary — because it sets your entire timeline.
Confirm the death year and whether the owner had reached their required beginning date to learn if annual Traditional RMDs apply.
Calculate any required annual RMD using the IRS Single Life Expectancy table, and take it before December 31.
Map a 10-year withdrawal plan that fills your low brackets each year with Traditional money and reserves the Roth for last.
Set calendar reminders for each annual RMD and the final year-10 deadline.
If you missed a prior RMD, withdraw it now and file Form 5329 to reduce or waive the penalty.
Check your state’s tax treatment and consult a CPA if your balances are large or your status is unclear.

FAQs

Should I empty an inherited Roth or Traditional IRA first? Traditional first, Roth last for most heirs. Traditional withdrawals are taxable, so spreading them keeps you in lower brackets; the Roth grows tax-free, so let it compound and withdraw it last.

Do I have to empty an inherited IRA within 10 years? Yes, for most non-spouse heirs whose loved one died in 2020 or later. Both Traditional and Roth inherited IRAs must be fully withdrawn by December 31 of the tenth year after the death.

Are inherited Roth IRA withdrawals taxable? No, qualified inherited Roth withdrawals are federally tax-free. The original owner already paid the tax. Earnings can be taxable only if the account has not met the 5-year holding rule.

Do I owe annual RMDs on an inherited IRA? It depends. If the owner died on or after their required beginning date, you must take annual Traditional RMDs in years one through nine. Inherited Roth IRAs have no annual requirement.

What is the penalty for missing an inherited IRA RMD? 25% of the shortfall for tax years after 2022. It drops to 10% if you correct it within a two-year window by withdrawing the amount and filing Form 5329.

Can I roll an inherited IRA into my own IRA? Only if you are the surviving spouse. Non-spouse beneficiaries cannot roll an inherited IRA into their own; doing so can trigger a fully taxable distribution.

Does the 10-year rule apply to inherited Roth IRAs? Yes, the full Roth balance must be withdrawn by year 10. But there are no required annual withdrawals during the 10 years, since Roth owners never had RMDs.

Will my state tax inherited Traditional IRA withdrawals? Usually yes in states with an income tax. Nine states with no income tax let the withdrawals escape state tax. Check your state Department of Revenue for specifics.

What is the best year to withdraw an inherited Roth IRA? Year 10, the final year, for most heirs. Holding the Roth as long as possible maximizes tax-free growth, since withdrawing it earlier provides no tax benefit.

When did the annual inherited IRA RMD rule start? 2025 was the first enforcement year. The IRS finalized the rule in 2024, requiring annual RMDs from certain inherited Traditional IRAs starting that year.

What form do I file if I miss an RMD? Form 5329. You report the shortfall, request the reduced 10% rate or a waiver, and attach an explanation showing you corrected the missed amount.

Can I take money from the Roth if I need cash? Yes, and it is often the smartest source. Qualified Roth withdrawals are tax-free and do not raise your taxable income, unlike Traditional withdrawals.

Related reading