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Inherited IRA Withdrawal Rules

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Inherited IRA Withdrawal Rules

With an Inherited IRA, you need to take annual distributions no matter what age you are when you open the account. This doesn’t apply if you've simply transferred another IRA to your own IRA.

Need IRA help? Call 866-855-5636 anytime. Or download our Inherited Retirement Account guide.

Inherited
IRA
distribution rules:

  • Generally, you must take distributions during your lifetime or within five years after the original account holder passed away.
  • With an Inherited Traditional IRA, you’ll pay taxes on any distributions you take.
  • Rollover, SEP, and SIMPLE IRAs become Inherited Traditional IRAs.
  • With an Inherited Roth IRA, you don’t pay taxes on distributions.
  • To evaluate the potential impact an inheritance might have on your overall tax situations, we recommend you also consult your tax advisor.

If you inherit a Traditional, Rollover, SEP, or SIMPLE IRA from a spouse, you have several options, depending on whether your spouse was under or over age 70½. Most commonly, those who inherit an IRA from a spouse transfer the funds to their own IRA.

Account Holder was under 70½

If your spouse (the account holder) was under 70½, these are your choices:

Account type You transfer the assets into your own existing or new IRA.
Money is available At any time, but a penalty will apply to withdrawals made before you reach age 59½.
Other considerations
  • Only available if the you are the sole beneficiary.
  • IRA assets can continue growing tax-deferred. 
  • If you are under 59½ you'll be subject to the same distribution rules as if the IRA had been yours originally, so you cannot take distributions without paying the 10% early withdrawal penalty—unless you meet one of the IRS penalty exceptions.
  • You may designate your own IRA beneficiary.
Account type You transfer the assets into an Inherited IRA held in your name.
Money is available Distributions must begin no later than 12/31 of the year the account holder would have reached 70½.
Other considerations
  • Your annual distributions are spread over your single life expectancy, which is determined by your age in the calendar year following the year of death and reevaluated each year.
  • If multiple beneficiaries, separate accounts must be established by 12/31 of the year following the year of death; otherwise, distributions will be based on the oldest beneficiary.
  • Required Minimum Distributions (RMDs) are mandatory and you are taxed on each distribution.
  • You will not incur the 10% early withdrawal penalty.
  • Undistributed assets can continue growing tax-deferred.
  • You may designate your own IRA beneficiary.
Account type You transfer the assets into an Inherited IRA held in your name.
Money is available At any time up until 12/31 of the fifth year after the year in which the account holder died, at which point all assets need to be fully distributed.
Other considerations
  • You are taxed on each distribution.
  • You will not incur the 10% early withdrawal penalty.
  • Undistributed assets can continue growing tax-deferred for up to five years.
  • You may designate your own IRA beneficiary.
Account type None. All assets in the IRA are distributed to you.
Money is available
All at once.
Other considerations
  • You will pay income taxes on the distribution all at once.
  • You will not incur the 10% early withdrawal penalty.
  • You may move to a higher tax bracket depending on the amount of the distribution and your current income level.


Account Holder was over 70½ 

If your spouse (the account holder) was over 70½, these are your choices.

Account type You transfer the assets into your own existing or new IRA.
Money is available

At any time, but a penalty will apply to withdrawals made before you reach age 59½ .
Other considerations
  • Only available if the you are the sole beneficiary.
  • IRA assets can continue growing tax-deferred.
  • You must take an RMD for the year of death (if the account holder did not already take it).
  • If you are under 59½ you'll be subject to the same distribution rules as if the IRA had been yours originally, so you cannot take distributions other than RMD for the year of the death without paying the 10% early withdrawal penalty.
  • You may designate your own IRA beneficiary.
Account type You transfer the assets into an Inherited IRA held in your name.
Money is available

You must begin taking an annual RMD over your life expectancy beginning no later than 12/31 of the year following the original account holder's death.

Note: If the original account holder did not take an RMD in the year of death, an RMD must be taken from the account by 12/31 of the year the original account holder died.
Other considerations
  • Your annual distributions are spread over your single life expectancy (determined by your age in the calendar year following the year of death and reevaluated each year) or the deceased account holder's remaining life expectancy, whichever is longer.
  • If there are multiple beneficiaries, separate accounts must be established by 12/31 of the year following the year of death; otherwise, distributions will be based on the oldest beneficiary.
  • Required Minimum Distributions (RMDs) are mandatory and you are taxed on each distribution.
  • You will not incur the 10% early withdrawal penalty.
  • Undistributed assets can continue growing tax-deferred.
  • You may designate your own IRA beneficiary.
Account type None. All assets in the IRA are distributed to you.
Money is available
All at once.
Other considerations
  • You will pay income taxes on the distribution all at once.
  • You will not incur the 10% early withdrawal penalty.
  • You may move to a higher tax bracket depending on the amount of the distribution and your current income level.


Take the next step.

Ready to move an Inherited IRA to your own IRA? We're here to help.

Call 866-855-5636.