The number is bigger than almost anyone realizes — and the arithmetic behind it is surprisingly simple.
OK let’s just do the math.
You and your spouse have traditional IRAs. Say it’s $3 million combined by the time you’re 73 and required distributions start. You and your spouse plan to live off Social Security, a pension, some dividends from taxable investments, and whatever the IRA generates through required minimum distributions.
You have three adult children, so anything you don’t spend during your lifetime will go to them.
Here’s the question almost nobody asks:
Of that $3 million, how much will ultimately end up with your family, and how much will end up with the federal and state governments?
The intuitive answer for most people is something like “well, we’ll pay some tax on what we take out, and the kids will pay some tax when they inherit — maybe 25 percent to taxes overall, 75 percent to the family.”
The actual answer, under default planning, is closer to 50-50 for a $3M account, and worse for larger accounts.
Not “50 percent of what you take out.” 50 percent of the entire account, across the family lifecycle.
Let’s walk through where it goes.
Phase 1: Your required distributions during joint life.
Starting at age 73, the IRS forces you to withdraw from the IRA each year using the Uniform Lifetime Table. In year one, you take about 3.8% of the balance. By age 89, you’re taking about 8% per year, whether you want to or not. Every dollar of that distribution is taxed as ordinary income — the highest rate the tax code applies — on top of whatever other income you have.
For our $3M example, filing jointly, over 17 years of retirement from age 73 to age 89, you’ll take somewhere around $3M of required distributions (the account keeps growing during this period, so the total distributions can exceed the original balance). You’ll pay approximately $400,000 to $500,000 of federal and state income tax on those distributions across those 17 years.
Which sounds like a lot. It’s actually the smallest of the three phases.
Phase 2: The widow phase.
Now say one spouse dies. The surviving spouse inherits the IRA via spousal rollover — a non-taxable event — and continues taking required distributions. But now they file as a Single taxpayer.
Single-filer brackets are roughly half as wide as Married Filing Jointly brackets. The standard deduction is halved. The same distributions that were being taxed at moderate rates are now taxed at substantially higher rates.
For a $3M account, over a 10-year widow phase, tax paid on the required distributions runs approximately $500,000 to $600,000. Roughly the same total tax as the entire 17-year joint phase before it — on a horizon roughly half as long.
Almost nobody warns you about this. Standard retirement projections silently assume MFJ filing forever, which is a peculiar assumption for a projection that’s supposed to run thirty years and doesn’t note that the probability of both spouses being alive at year 30 is somewhere between 10 and 40 percent depending on age and health.
Phase 3: The heirs.
When the surviving spouse dies, the remaining IRA balance passes to the three adult children. Before 2020, they could have stretched the distributions across their own lifetimes — small annual withdrawals, most of the account continuing to compound tax-deferred, decades of continued growth.
The SECURE Act of 2019 changed that. Inherited IRAs must now be fully distributed within 10 years of the original owner’s death. And the distributions land on the heirs’ tax returns during their 50s and 60s — their peak earning years — stacking on top of substantial W-2 or business income and often pushing marginal rates into the 32-37% federal brackets.
For our $3M IRA, the remaining balance at the surviving spouse’s death is roughly $2M (larger accounts keep growing faster than distributions during the widow phase). The heirs collectively receive about $2.7M in distributions over the 10-year window and pay approximately $700,000 to $800,000 in federal and state income tax on those distributions.
Add it up.
Phase 1 (joint life): ~$450,000 in tax
Phase 2 (widow phase): ~$550,000 in tax
Phase 3 (heir phase): ~$750,000 in tax
Total tax to government across the family lifecycle: approximately $1.75 million.
Of a starting $3 million IRA.
That’s 58% of the original account principal flowing to federal and state governments across the full family lifecycle under default planning. Your family keeps 42%.
For a $5 million IRA, the total tax rises to approximately $3.5 million — about 64% of principal to government, 36% to family.
For a $7.5 million IRA, the ratio worsens further, with roughly 70% of principal flowing to government across the family lifecycle.
These are not extreme cases. They’re not aggressive assumptions. They assume standard investment returns, standard mortality, standard tax law applied as written. They’re the actuarial default for any married couple with substantial traditional retirement assets.
The reason most people never see these numbers is that most retirement projections don’t run them. Financial planning software typically models portfolio returns, safe withdrawal rates, and probability-of-ruin — but few tools model filing-status changes at the surviving spouse, and even fewer model the heir-phase tax under SECURE. The lifetime family tax number requires modeling all three phases together, which most tools don’t do and most advisors don’t run.
The result is that nearly every household with a substantial traditional IRA is walking around with a rough sense that “we’ll pay some tax eventually” while carrying, on average, a mid-six-figure to mid-seven-figure tax liability they’ve never seen quantified.
Which is a strange thing to not know about your own money.
Each of the phases behind this number — the required distribution rules, the widow’s tax cliff, the SECURE Act’s 10-year drawdown — is its own piece of the arithmetic, and each has its own set of planning responses. Our working analytical memo walks through the full picture, with worked examples for households at different balance sizes.
The number is what it is. Whether you do anything about it is another question entirely.
