How to cash out an inherited IRA without paying huge taxes
You can offset the withdrawals by maxing out your own 401(k) to keep yourself in a lower tax bracket. Without access to a tax attorney, the fear of being heavily taxed leaves many people completely unsure of how to safely liquidate the account.
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.
- 1Consulting accountants or financial counselorsDid this help you?
- 2Asking online personal finance communities for guidanceDid this help you?
- 3Spreading withdrawals across multiple years to stay within lower income tax bracketsDid this help you?
- 4Offsetting taxable income from withdrawals by maximizing 401(k) and Traditional IRA contributionsDid this help you?
- 5Increasing traditional 401(k) pre-tax salary deferrals to lower overall adjusted gross income while withdrawing from an inherited traditional IRA.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.
“I have an inherited ira that I need to take out in a few years. I’m currently in the 12% bracket but that will change next year. If I max out my 401k for the rest of the year, and then take out a portion of the ira, as long as I stay under 12% cutoff with the amount I take out will offsetting with a higher 401k contribution work?”source ↗
“The conundrum is I do not know how to liquidate it without incurring taxes.”source ↗
“That is why I turn to you folks again instead as I do not have any other resources such as a financial law or tax law attorney.”source ↗
“I am worried because when my parents claimed my late brother's pension they were heavily taxed for it.”source ↗
Where this came up
People with this problem also raised
- 10How to rebalance a concentrated stock portfolio without a huge tax bill
- 15What do I do with an inherited IRA?
- 3How to minimize taxes on a large pre-tax retirement account and RMDs
- 2How to move investments into an ISA without paying a huge tax bill
- 12How do I roll over a 401k after a layoff?
- 4How to avoid high fees on an inherited Edward Jones account