[USER]

Daughter, age 54, with an inherited IRa. Understand the laws for withdrawal and expect to take the majority of them in the next five years when income is the lowest.

Expect to retire at 70. I understand that it is considered taxable and will pay ordinary tax on it.

My question then becomes where are the best places to park it once I withdrawal it? I’m too young to retire.

Am I really going to need to invest it somewhere else and pay tax again?

It seems silly but I can’t think of any other option to avoid further tax but let it grow the next 16 years. For reference it will be about $25k

[Lisa]

You won’t pay tax again, you’ll just pay tax on the gains once you start investing or investment income it produces.

It’s not bad to have after tax money in a brokerage account you can use at will.

I’d set up a brokerage account and move it to that account and let it grow until you want to use it.

You could tap into this first when you retire to let your pretax accounts continue to grow.

Or If you work & are not maxing out your 401k, you could and just use the inherited money to live on while you put more in the tax deferred account from your paycheck.

[Stephen]

Are you maxing your 401k, HSA etc with you income. If not consider maxing out those with a tax break and supplement that lost income with some of what you need to take out from you inherited IRA.

Whatever you have left over put in a taxable brokerage account and/or a Roth.

[Ed]

54 and still working, I would consider investing proceeds in a Roth account if eligible and no more tax worries.

[Juliett]

Not enough info.
You must take it within 10 years in order to avoid penalties.
What is your annual income?

I’d take to the top of the tax bracket that makes sense.

And if you’re not maxing out your own retirement, offset the taxes by maxing out your own retirement.

You’re over 50, so you can put up to $30,500 into your 401K/403B/TSP.
Do you max your own retirement?

[Kimberly]

Are you already maxing out your own IRA? If not, you can deposit your inherited IRA withdrawals into a Roth IRA (up to $8K per year).

If you make too much to directly deposit into a Roth, you can deposit into a traditional IRA and then immediately convert that deposit into a Roth.

Also consider investing in a 529 plan if you have kids to educate.

[Kris]

I’m assuming this is inherited from a parent or relative? You have 10 years to withdraw. Pay ordinary income tax.

Then you do what you want with the money, invest, spend etc.

[Author]

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