Nondeductible contributions aren't taxable when you do a Roth conversion because taxes have already been paid on the money. Before converting, you might check your spouse's past tax returns to see if they included Form 8606, which is used to report nondeductible IRA contributions. Keep in mind that, depending on the type of contributions your spouse made to their IRA, you'll have to pay taxes on the converted amount. Once the inherited assets are in your own IRA, if you want tax-free income in retirement or think your tax rate may be higher in the future, you could also consider converting your traditional IRA to a Roth. An advantage of taking RMDs from your own IRA (versus an inherited IRA) is that the RMDs will typically be smaller because of the way RMDs are calculated for IRA owners versus the way RMDs are calculated for beneficiaries. When you assume IRA assets, you will start taking RMDs based on your age (either 73 as of 2023 or 75 starting in 2033). ![]() ![]() ![]() Another reason to consider assuming the IRA is that you may be able to make additional contributions to help build your savings. For example, if your spouse had a Roth IRA, you have to transfer the money into a new or existing Roth IRA in your own name.Īdding the inherited assets to your own IRA may help preserve any potential tax benefits, including the opportunity for tax-deferred (traditional) or tax-free (Roth) growth. Keep in mind, it has to be the same type of IRA you inherited. You can add the inherited IRA assets to your own IRA and potentially keep it growing, which may give you more money for retirement. If you've inherited an IRA from your spouse, you have a choice no one else has, and the latest changes to SECURE 2.O did NOT change it. Here's what else you need to know about inheriting an IRA. Roth IRAs only have a RMD requirement once the original Roth IRA owner dies and the Roth IRA passes to the beneficiary(ies). With the passage of SECURE 2.0, the RBD and required minimum distributions (RMDs) moved to age 73 for those who reached that age in 2023.Īll types of IRA owners (traditional IRA, SEP, SIMPLE) must withdraw the minimum RMD, except for owners of Roth IRAs. The original SECURE Act that went into effect in 2020 changed the RBD for IRA owners to April 1 of the year the IRA owner turns 72, but only for IRA owners born on or after July 1, 1949. Before the SECURE Act, the RBD was April 1 of the year following the year the IRA owner turned age 70 1/2. Instead, the IRS requires that money must be withdrawn annually once the IRA owner reaches the required beginning date, or RBD. When it comes to these individual retirement accounts (IRAs), it's important to understand the rules that have recently changed related to the Setting Every Community Up for Retirement Enhancement (SECURE) Act and its latest incarnation, SECURE 2.0.īefore we begin the inherited IRA discussion, remember that assets in IRAs cannot be left forever. One way wealth passes from generation to generation is through inherited IRAs. Wealth and Investment Management Solutions.Meet the experts behind Schwab's investing insights.Environmental, Social and Governance (ESG) Investing.Bond Funds, Bond ETFs, and Preferred Securities.ADRs, Foreign Ordinaries & Canadian Stocks.Environmental, Social and Governance (ESG) ETFs.Environmental, Social and Governance (ESG) Mutual Funds. ![]()
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