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Have you received an inherited IRA and are unsure what to do with it? Are you confused? Well, you should be.
The IRS loves confusion and has knocked it out of the park regarding inherited IRAs for beneficiaries. In this article, I want to shed some light on how someone might be able to “stretch” an inherited IRA since the IRS took that away. Now, I am speaking to designated beneficiaries! If you are an eligible designated beneficiary or any other type of beneficiary other than a designated beneficiary, this may or may not be for you. If you have questions about the different types of beneficiaries and what each means, please reach out to us. It can be confusing.
What I want to do is give the children who inherit mom or dad’s IRA a strategy they may not have considered yet to stretch that inheritance over their lifetime instead of the ten years the IRS currently requires.
As of right now, if you inherit an IRA, the IRS requires you to drain that account in 10 years. How fast you have to empty the inherited IRA will depend on whether the deceased passed away before the required beginning date (RBD) or not.
So, what should you do? I have a question. Where are you in your retirement savings? Most people will say they are behind. Are you maxing out your 401k contributions? Probably not. Should you be? Yes. I already admitted I was behind. Lay off me.
Here is a suggestion. Find out what you need to add to your 401k each year to reach the maximum and do it. Whatever that amount is, take it from the inherited IRA to replace that lost income. What you are doing is indirectly “transferring” that inherited IRA into your qualified plan to continue growing, tax-deferred, based on your lifespan. The inherited stretch IRA has come home! You have given your retirement savings a much-needed boost without losing income or affecting your taxes.
Here are a few things to be aware of:
As always, talk to your tax or financial professional before employing a strategy like this to make sure you are following all of the IRS rules for your situation. If you have any questions or are interested in discussing this potential strategy in more detail, please contact us.
The views expressed represent the opinion of Good Life Asset Strategies, LLC. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness.
Good Life Asset Strategies, LLC is a registered investment advisor located in Fort Worth, Texas. Good Life Asset Strategies, LLC and its representatives are in compliance with the current registration and notice filing requirements imposed upon registered investment advisors by those states within which the firm maintains clients.
All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. Such an offer can only be made in the states that Good Life Asset Strategies, LLC is either registered or a notice filer or an exemption from registration is available under the securities laws or other laws.