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.
- 1Asking customer support at financial institutions like Fidelity for clarification
- 2Consulting with a tax professional or fiduciary financial planner
- 3Trying to research and make sense of complex tax rules and withdrawal guidelines online
- 4Running numbers in a spreadsheet to figure out tax brackets
- 5maximizing employer 401k contributions to lower taxable income while drawing down inherited funds
- 6spreading withdrawals evenly over the 10-year limit
- 7Consulting online resources
- 8Talking to tax professionals
- 9Asking questions on online financial forums
- 10Cashing out the entire balance in one year
- 11Spreading distributions out over the ten years to land in lower tax brackets
- 12Using withdrawals to replace take-home pay while increasing personal paycheck retirement contributions
In their words
Unedited, most upvoted first, 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 ↗
“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 ↗
“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 ↗
Where this came up
People with this problem also raised
- 4How to avoid high fees on an inherited Edward Jones account
- 9What funds and allocations should I pick for a new Roth IRA?
- 5Why can't I withdraw my 401k after leaving a job?
- 3How to handle 401(k) contributions and employer matches when changing jobs
- 4Is a small 401k loan a bad idea for cash flow?
- 2Will withdrawing a 401k make my parent lose Medicaid?