- I am inheriting around $30k from my Mom’s IRA. I intend to roll it into a Roth IRA.
- I am a professional trader (yeah call it day trading, but that’s not the point of the question, please). I intend to shelter the gains on those trades in the IRA, so I don’t have to pay the tax right now.
- I plan to take some distributions in a few years, well before retirement age.
Does this make sense?As I understand it – If I took the inheritance as a lump sum distribution I would get the 10% tax hit now, plus have to pay capital gains on each trade I make. Whereas if I roll it into a Roth IRA, I can trade without capital gains, until I take the distributions in years to come, probably at the same 10% tax rate in the future – no EXTRA penalty, right?
Ok Wayne is correct. Only a spouse can roll the money.
http://www.schwab.com/public/schwab/investment_products/retirement/inherited_iras/faq?cmsid=P-2008538&lvl1=investment_products&lvl2=retirement
Thanks for the answers anyway.
Thanks, if I had time to read TWO books on the subject I wouldn’t be posting my question here. If you have actually read the books perhaps you could share your knowledge?
You should read "The Retirement Savings Time Bomb" and "Parlay Your IRA into a Family Fortune" by Ed Slott and consult with a CFA (Certified Financial Planner) before you "take possession" of the IRA. Doing that could save you thousands in unnecessary taxes.
I do not believe that you can roll over an inherited IRA.
I believe that you have 3 options:
1) Lump sum distribution.
2) Distribute over 5 years.
3) Distribute over your expected lifetime.
All of these options would be fully taxable as the money is distributed. Assuming that her IRA was a deductible traditional IRA, you would pay ordinary income taxes on the distributions but no 10% penalty.
Consult your tax professional before you do anything.
References :
IRA withdrawals or gains are not capital gains. If the withdrawal is taxable, it would be taxed as ordinary income.
Ordinarily withdrawals from a Roth IRA are not taxable since the money that went into the IRA has already been taxed. It might be subject to Estate Tax if the estate of the decedent was big enough to be taxed.
References :
You should read "The Retirement Savings Time Bomb" and "Parlay Your IRA into a Family Fortune" by Ed Slott and consult with a CFA (Certified Financial Planner) before you "take possession" of the IRA. Doing that could save you thousands in unnecessary taxes.
References :