I Just Inherited an IRA — What Should I Do?
Inheriting an IRA can bring a mix of emotions. Often it happens during a difficult time after losing someone important. Along with that, you may suddenly be responsible for a retirement account that could be worth tens of thousands — or even millions — of dollars.
Many people worry about making a mistake that could trigger unnecessary taxes or penalties.
The good news is that if you take a few thoughtful steps, you can protect the account and make decisions that support your long-term financial future.
Below is a clear guide to what to do if you inherit an IRA.
Step 1: Find Out What Type of IRA You Inherited
The first thing to determine is whether the account is a Traditional IRA or a Roth IRA.
This matters because taxes and withdrawal rules are very different.
Traditional IRA
• Withdrawals are usually taxable as income
• Required withdrawals must follow IRS rules
• Planning the timing can help reduce taxes.
Roth IRA
• Withdrawals are generally tax-free
• Investments continue growing tax-free
• Still subject to certain distribution rules.
Understanding the type of account sets the foundation for your strategy.
Step 2: Determine Your Relationship to the Original Owner
Your options depend heavily on whether you are:
• A spouse
• A child or other relative
• A non-family beneficiary.
If You Are a Spouse
You have the most flexibility.
A surviving spouse can:
• Move the IRA into their own IRA
• Treat it as their own retirement account
• Convert it to a Roth if appropriate.
If You Are Not the Spouse
Most beneficiaries must follow what is known as the 10-Year Rule.
Step 3: Understand the 10-Year Rule
Under the SECURE Act, most non-spouse beneficiaries must withdraw the entire inherited IRA within ten years.
Important points:
• The account must be emptied by the end of year ten
• Withdrawals from traditional IRAs are usually taxable
• Roth IRA withdrawals are generally tax-free.
You usually have flexibility in when you take distributions.
That flexibility can make a big difference in taxes.
Step 4: Open an Inherited IRA
In most cases you cannot simply move the funds into your own IRA.
Instead, the account must be titled correctly as an Inherited IRA.
Example:
John Smith IRA (deceased 2025)
FBO Sarah Smith, Beneficiary
Proper setup ensures you avoid penalties and remain compliant with IRS rules.
Step 5: Avoid the Biggest Mistake — Cashing Out Immediately
One of the most common and costly mistakes people make is withdrawing the entire account at once.
Why this can be a problem:
• It may push you into a much higher tax bracket
• The funds lose the opportunity to grow
• A large portion could go to taxes.
Instead, many people benefit from spreading withdrawals over multiple years.
Step 6: Review the Investments
Inherited IRAs often remain invested exactly the way the original owner left them.
That portfolio may or may not match your goals.
Things to review include:
• Risk level
• Asset allocation
• Time horizon
• Income needs.
Even small adjustments can make a meaningful difference over time.
Step 7: Consider Your Overall Financial Plan
An inherited IRA can affect many areas of your financial life.
You may want to consider:
• Paying down high-interest debt
• Boosting retirement savings
• Funding education for children
• Creating an emergency fund
• Investing for long-term growth.
Instead of viewing the inheritance as quick spending money, many families benefit from integrating it into a broader plan.
Common Inherited IRA Mistakes to Avoid
Many beneficiaries unintentionally reduce the value of their inheritance because they are unfamiliar with the rules.
Frequent mistakes include:
• Missing required deadlines
• Taking withdrawals too quickly
• Ignoring tax implications
• Keeping unsuitable investments
• Not seeking guidance.
Understanding the rules early can help you preserve more of what was left to you.
Why More People Are Facing This Situation
The United States is in the middle of one of the largest wealth transfers in history.
Over the coming decades, trillions of dollars will pass from older generations to heirs through:
• IRAs
• 401(k)s
• Investment accounts
• Real estate.
For many people, inheriting a retirement account is something they’ve never dealt with before.
That’s why education and planning are so important.
When It May Help to Speak with a Financial Advisor
Inherited retirement accounts involve tax rules, distribution strategies, and investment decisions.
Working with a fiduciary advisor can help you:
• Understand your options
• Avoid unnecessary taxes
• Create a withdrawal strategy
• Align the inheritance with your long-term goals.
Even a short conversation can provide clarity.
Talk With Mintco Financial
Questions About an Inherited IRA?
If you recently inherited a retirement account and want guidance on taxes, withdrawals, or investment options, our team is here to help.
Schedule your complimentary meeting today.
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Final Thoughts
If you’ve recently inherited an IRA, taking time to understand your options can help you protect the account and avoid unnecessary taxes.
Key things to remember:
• Identify the type of IRA
• Understand the 10-year rule
• Avoid rushing withdrawals
• Review investments
• Build a thoughtful strategy.
Handled wisely, an inherited IRA can become an important foundation for your financial future.