Disclaimer: The calculations and results provided by this Inherited IRA Calculator are for illustration and general information purposes only. They do not constitute legal, tax, or investment advice and should not be used or relied upon as such. Actual results will vary based on individual circumstances, changing tax laws, and market performance. Always consult a qualified professional (such as an attorney, certified tax advisor, or financial planner) for personalized guidance regarding your specific situation.
How This Calculator Works
This IRA Inheritance Calculator helps you visualize potential distribution scenarios and estimate taxes for an inherited IRA. Here’s an overview of the steps involved:
Gathering Your Inputs
You enter the inherited IRA balance, your current age, the relationship to the original account owner, and whether you meet the definition of an “eligible designated beneficiary.” This determines which IRS rules apply to your required minimum distributions (RMDs) or the 10-year rule.
For non-eligible, non-spouse beneficiaries subject to the 10-year rule, you can choose from multiple strategies for depleting the account:
- All In Year 10: No withdrawals until the final year, at which point the remaining balance is distributed in a lump sum.
- Spread Evenly: Distribute the same amount each year for 10 years to end with a $0 balance at the end of the period.
- 10% Annually + Catch-Up: Take 10% of the IRA’s value each year, then distribute whatever is left in the final year to comply with the 10-year deadline.
Calculating Distributions
The calculator determines how much you withdraw each year under the chosen scenario. For spousal beneficiaries or eligible designated beneficiaries, it calculates distributions using life-expectancy rules. For non-spousal, non-eligible beneficiaries, it calculates distributions over 10 years according to your selected strategy.
Estimating Taxes
Once the annual distribution amount is known, the calculator uses a simplified tax bracket model to estimate how much tax would be owed on each distribution. This results in an “estimated tax” figure and an “effective tax rate.” These estimates can be helpful for planning purposes, but actual tax liability depends on your total income, deductions, and real-time tax laws.
Visualizing the Results
The calculator then displays the year-by-year results in a table—showing your starting balance, distribution, estimated tax, and remaining balance each year. It also generates a chart to provide a visual snapshot of how your IRA balance and annual withdrawals change over time.
Because everyone’s financial situation is unique—and because laws and regulations continually change—please consult with a qualified advisor for personalized guidance regarding your inherited IRA. This calculator is intended to offer a rough estimate and a general sense of how different distribution strategies may affect your IRA balance and tax impact over time.