What do I do with an inherited IRA?
Inheriting a retirement account means navigating complex IRS rules, such as a mandatory 10-year emptying window, without clear guidance from financial institutions. This confusion leaves beneficiaries overwhelmed about how to invest the funds, whether they can transfer them to a Roth account, and how to withdraw money without triggering massive tax bills.
What people tried
Every workaround mentioned in the threads below. We haven’t tested any of them — and nobody here is claiming they worked.
Found another way around this?
Share your steps and trade-offs so fellow engineers don't have to reinvent the wheel. No account required.
- 1Asking customer support at financial institutions like Fidelity for clarificationDid this help you?
- 2Consulting with a tax professional or fiduciary financial plannerDid this help you?
- 3Trying to research and make sense of complex tax rules and withdrawal guidelines onlineDid this help you?
- 4Running numbers in a spreadsheet to figure out tax bracketsDid this help you?
- 5maximizing employer 401k contributions to lower taxable income while drawing down inherited fundsDid this help you?
- 6spreading withdrawals evenly over the 10-year limitDid this help you?
- 7Consulting online resourcesDid this help you?
- 8Talking to tax professionalsDid this help you?
- 9Asking questions on online financial forumsDid this help you?
- 10Cashing out the entire balance in one yearDid this help you?
- 11Spreading distributions out over the ten years to land in lower tax bracketsDid this help you?
- 12Using withdrawals to replace take-home pay while increasing personal paycheck retirement contributionsDid this help you?
- 13Reading the contract terms to check penaltiesDid this help you?
- 14Utilizing the penalty-free annual withdrawal provision (such as withdrawing 10% each contract year)Did this help you?
- 15Paying the surrender fee to exit the contract earlyDid this help you?
- 16Rolling over the balance to an inherited IRA instead of a direct cash withdrawalDid this help you?
- 17leaving the funds in the old employer planDid this help you?
- 18cashing out and paying taxes and potential penaltiesDid this help you?
- 19rolling the money into a current employer's 401(k) or an IRADid this help you?
- 20leaving the funds untouched in the inherited accountDid this help you?
- 21withdrawing funds gradually over the 10-year period to manage tax bracketsDid this help you?
- 22reinvesting withdrawn funds into traditional IRAs, Roth accounts, or taxable brokeragesDid this help you?
- 23consulting a certified financial planner or tax professionalDid this help you?
- 24Leaving the account alone until age 59.5 and keeping it invested in long term investments like index fundsDid this help you?
- 25rolling the old 401k directly into a current employer's 401k planDid this help you?
- 26rolling the old 401k into an independent self-managed IRA at a low-cost brokerage like Fidelity, Schwab, or VanguardDid this help you?
- 27investing in broad-market index funds or target-date funds instead of paying a management feeDid this help you?
- 28taking RMDs annuallyDid this help you?
- 29waiting until retirement to withdraw fundsDid this help you?
- 30planning to hire a tax or estate professionalDid this help you?
- 31taking the required minimum distribution every year and paying taxes on itDid this help you?
- 32performing a Roth conversion and using the inherited IRA to pay the taxDid this help you?
- 33taking larger disbursements in years with lower incomeDid this help you?
- 34relying on an existing accountant who only handles yearly returnsDid this help you?
- 35considering finding a new accountant or attempting to calculate the math independentlyDid this help you?
- 36Asking for reading recommendations and educational resources on personal finance subreddits.Did this help you?
In their words
Unedited, grouped by where they were said, most upvoted first within each place, each linked to the thread it came from.
“Would I be able to put this money into a Roth IRA at the end of the 10 years?”source ↗
“The bank is telling her that she's going to have to cash out her IRA Thursday, since there is a 10 year limit.”source ↗
“She asked the bank and they said it doesn't apply and she'll still have to cash out.”source ↗
“I really have no idea what is going on with this money.”source ↗
“Now I have this inherited IRA and I don’t know what to do with it.”source ↗
“From what I read, it sounds like I have to empty it within 10 years. If that’s the case, what was the point of opening this?”source ↗
“Can I invest directly from this inherited IRA?”source ↗
“In that case you have to pay the surrender fee to get out and it’s not pretty.”source ↗
“I swear I’ve tried reading the info from Fidelity and I felt like I was speaking a different language. I need a true explain like I’m 5.”source ↗
“How can he go about withdrawing the money while minimizing surrender charges? Are there any options or strategies he should consider to avoid or reduce the surrender penalties?”source ↗
“The surrender value is around 112k. Does it mean that’s what he got if he withdraws it now? And should he?”source ↗
“Does anyone know if all funds are viewed as my contributions, or is the contribution/earnings split maintained after a rollover?”source ↗
“I have a unique situation for this calendar year and want to make sure I make the most of it!”source ↗
“Basically I'm just not sure if it's the smartest move to put that much money into the 401k instead of something more liquid.”source ↗
“My dad recently passed, and passed along to me approx $45k in a 457. I understand I have 10 years to withdraw this money from the account, but I am at a bit of a crossroads on how to use it.”source ↗
“Obviously, I would like to be as tax-efficient as I can. So far my thoughts are to use it to replace the income I use to max out my Roth IRA, or to use it to off-set the money I use to pay my student loans monthly.”source ↗
“I'm a 52F and left my former employer in February 2022. I still have about $23K in their ESOP.”source ↗
“What I don't understand is whether this $23K is still growing/increasing in value now that I haven't worked for the company since 2022.”source ↗
“My goal is to keep the money growing but have it more readily available if I ever had a serious financial emergency, instead of only being able to access it once a year.”source ↗
“I'm 52 and honestly know very little about retirement accounts, so please explain it in normal person language aka like I'm three years old.”source ↗
“What are my options here and what should I do?”source ↗
“Understanding retirements is way over my head. My dad left me a portion of his retirement 3 yrs ago and I haven’t done anything with the funds yet.”source ↗
“Does this rule mean even if I move the money, I still have to use it within the 10 yrs? Or is that only regarding the account it's currently in??”source ↗
“Otherwise, if i can transfer it, what's the best option to do that so it continues to grow, and has minimal tax penalties?”source ↗
“I understand from what u said, I basically have to withdrawal to my bank account first, and get taxed on it during tax time, and then I can move it to the Roth account as I wish.”source ↗
“Dang, I did not know there was income limit for a Roth ira. We are currently not close to that limit, but let's assume in 3 yrs we are, how does that work?”source ↗
“I have a non-spouse inherited IRA with a lifetime withdrawal plan. I’ve just been taking the RMD every year and paying taxes on it.”source ↗
“If you take a $5k withdrawal from your inherited IRA in the 22% bracket you incur $1100 in federal income tax.”source ↗
“I have $200k in an old 401k that is earning like 10% while my current 401k is earning close to 20%. Equitable says they have a relationship with my current employer and offers a low rate of .2% to manage my funds.”source ↗
“What do I need to ask Equitable before signing a contract with them?”source ↗
“Should I instead just roll my old 401k into my new 401k (is that even possible after 3 years?)”source ↗
“Should I do a self-managed IRA?”source ↗
“Should I hire a financial advisor first? Or is Equitable considered that financial advisor?”source ↗
“So what is the best way to transfer/withdraw the funds? Do I wait until I'm retired and earn zero income or should I be taking a certain allotment out now within my tax bracket?”source ↗
“I'm wondering if I should max out my 401k and then take out as much as I can from the IRA-BDA this year without hitting a higher tax bracket? But even if I wanted to, I don't know how to calculate that.”source ↗
“Should I find another accountant, do the math myself, or avoid this idea entirely?”source ↗
“I’m looking for advice on where to start really. What is interesting or helpful to read, that could help me understand how to invest in a concerted effort.”source ↗
Where this came up
People with this problem also raised
- 13When is the best time to do a retirement account rollover?
- 3How to cash out an inherited IRA without paying huge taxes
- 4How to avoid high fees on an inherited Edward Jones account
- 2How do you plan for retirement when your spouse isn't a saver?
- 3How to minimize taxes on a large pre-tax retirement account and RMDs
- 4How do 401(k)s and retirement accounts actually work?