The Do’s and Don’ts of Inherited IRAs

When you inherit an IRA, you likely have a lot of questions. Do you need to take RMDs? When? How long do you have before the account must be cleaned out?

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There’s been significant buzz recently focused on the expected transfer of approximately $72 trillion (yes, trillion with a T) of personal assets in the United States over coming years from baby boomers to younger generations. While this may seem to negate the need for pre-retirees to plan for their own retirements (spoiler alert — it doesn’t), it does highlight the significant role inherited IRAs play in wealth transfers between generations.

There are two types of inherited IRAs: traditional and Roth. An inherited traditional IRA is a tax-deferred investment account that is used as the vessel to receive assets coming from another tax-deferred investment account (e.g., traditional 401(k)s and traditional IRAs). By comparison, an inherited Roth IRA is an after-tax investment account used to receive assets from a Roth 401(k) or Roth IRA.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Vincent Birardi, CFP®, AIF®, MBA
Wealth Adviser, Halbert Hargrove

Vincent Birardi is based in Halbert Hargrove’s Long Beach headquarters and brings more than 20 years of experience in financial services to his wealth advisory relationships with clients — along with a passion for identifying solutions that will enable them to fulfill their life goals. What he values most about his role is helping to bring clarity and peace of mind to clients and their families. Prior to joining the firm in 2018, Vincent held management roles with PIMCO and Morgan Stanley. He was awarded the ACCREDITED INVESTMENT FIDUCIARY™ designation by the University of Pittsburgh-affiliated Center for Fiduciary Studies and is a CERTIFIED FINANCIAL PLANNER™ professional.