The loss of a spouse is a devastating event, and adjusting to the changing life while dealing with all the financial decisions can be overwhelming. One of the financial decisions you will have to make is how you want to handle it when you inherit your spouse’s Individual Retirement Account (IRA).
If you inherit a Traditional IRA from your spouse
There are two main types of IRAs that you can inherit: a Traditional IRA or a Roth IRA. You have three options if you inherit a Traditional IRA from your spouse:
You can withdraw the money
You will pay income taxes on the amount withdrawn if you take the IRA out, but no penalty taxes will apply regardless of your age. This option is good because distributions from an IRA before age 59 and a half are usually subject to a 10% penalty tax.
You can treat the IRA as your own
You can treat the IRA as your own by naming yourself the account owner or by transferring the inherited IRA into your own IRA account. This method may often be the best option if you are over age 59 and a half or if your spouse was older than you.
You can name yourself as a beneficiary
This option may be the best if you are under age 59 and a half or if you are older than your spouse. When setting up the account to consider you as the beneficiary of the inherited IRA, the required minimum distribution amounts are based on your spouse’s age at the time of their death.
Frequently Asked Questions (FAQs)
How do the rules differ for an inherited Roth IRA?
What are the other differences between a Roth IRA and a Traditional IRA?
Thank you for using this article to learn what you can do with an inherited IRA from your spouse. We hope this information is helpful in making an important financial decision.
Source: https://www.thebalancemoney.com/i-inherited-an-ira-from-my-spouse-what-are-my-choices-2388695
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