$4900.00 INHERITED IRA

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
BOGBECK
Posts: 3
Joined: Wed May 30, 2018 10:05 am

$4900.00 INHERITED IRA

Post by BOGBECK » Tue Sep 18, 2018 11:18 am

What are ways to deal with a $4900 Inherited IRA at Charles Schwab? The owner was born 1922, died 2017, and the non spouse inheritor in 1950. RMD's would be $275 and the RMD calculator takes the Traditional IRA out 20 years. $2000 is in CD's that mature in 12 months and the rest cash.

User avatar
David Jay
Posts: 5633
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: $4900.00 INHERITED IRA

Post by David Jay » Tue Sep 18, 2018 11:26 am

For simplicity in my life, I take the full 4900 out next year (after the CDs mature) and pay taxes on it. Done.

But if you want, you can withdraw the minimum starting at $275 and increasing over your lifespan. Track it and don't forget to include the RMD paperwork in your taxes every year for the rest of your life.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Alan S.
Posts: 7744
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: $4900.00 INHERITED IRA

Post by Alan S. » Tue Sep 18, 2018 11:35 am

BOGBECK wrote:
Tue Sep 18, 2018 11:18 am
What are ways to deal with a $4900 Inherited IRA at Charles Schwab? The owner was born 1922, died 2017, and the non spouse inheritor in 1950. RMD's would be $275 and the RMD calculator takes the Traditional IRA out 20 years. $2000 is in CD's that mature in 12 months and the rest cash.

Once the account is re titled and transferred to an inherited IRA for the beneficiary, the annual life expectancy RMDs must be distributed each year with the first RMD due no later than 12/31/2018. The initial divisor of 18.6 is then reduced by 1.0 each year. The distributions are taxable (unless the owner had basis in the IRA shown on Form 8606) but not subject to penalty since they are death benefits. The beneficiary can always take out MORE THAN the annual RMD, but not less. A lump sum distribution may be practical given the small balance in the IRA.


There is plenty of cash to meet the RMD for a few years, but if there wasn't many CD issuers will allow an RMD distribution without an early withdrawal penalty for the CD. If the IRA custodian(s) do not provide the type of investments the beneficiary prefers, the inherited IRAs can be moved by direct trustee transfer to another custodian. For this small of an account, there should only be one custodian used. Most important to know is that NO 60 day rollovers are permitted, so any check payable to the beneficiary will be irrevocably taxable. Finally, beneficiary should name their own successor beneficiary on the inherited IRA account.

aristotelian
Posts: 4698
Joined: Wed Jan 11, 2017 8:05 pm

Re: $4900.00 INHERITED IRA

Post by aristotelian » Tue Sep 18, 2018 12:06 pm

Unless you are right at the edge of your tax bracket, I would go ahead and cash it out. Otherwise you will probably end up sticking your inheritor with an even smaller inherited IRA to deal with.

LarryAllen
Posts: 1095
Joined: Fri Apr 22, 2016 9:41 am
Location: State of Confusion

Re: $4900.00 INHERITED IRA

Post by LarryAllen » Tue Sep 18, 2018 12:13 pm

Cash it out! Simplify. Less is more.

BOGBECK
Posts: 3
Joined: Wed May 30, 2018 10:05 am

Re: $4900.00 INHERITED IRA

Post by BOGBECK » Tue Sep 18, 2018 12:16 pm

Thank you all for the info. I'll select one word from the first three posts and then we'll move on.
Simplification, practical and sticking. I'll do the simplification which will be practical for me and what I had not considered was sticking the inheritor.
So very good info from all of you.
Thank you.
:sharebeer

livesoft
Posts: 62720
Joined: Thu Mar 01, 2007 8:00 pm

Re: $4900.00 INHERITED IRA

Post by livesoft » Tue Sep 18, 2018 12:18 pm

I have such an inherited IRA. I didn't cash it out. It is actually trivially simple to have the custodian figure out and send one the RMD every year. My RMD is even less than $200, but I have it sent to me on on the birthday of my mother and we use the money to go out to a nice dinner.
Wiki This signature message sponsored by sscritic: Learn to fish.

Alan S.
Posts: 7744
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: $4900.00 INHERITED IRA

Post by Alan S. » Tue Sep 18, 2018 1:13 pm

There is always a hybrid solution.

For example, you could:
1) Take annual RMDs until it becomes too much of a hassle, then cash it out.
2) If you cash it out, even though the amount is small, if a total lump sum will spill over into a higher bracket you could cash it out over 2 years, 1/2 each year.
3) If you are still working and not maxing out your OWN retirement plan contributions, some people will cash out the inherited IRA and use it to replace the funds used to increase your own retirement plan contributions. This would be neutral with respect to taxable income, and the money would end up in your own plan, which would have much lower RMDs lasting over more years, and you would have one less account to deal with.

123
Posts: 3733
Joined: Fri Oct 12, 2012 3:55 pm

Re: $4900.00 INHERITED IRA

Post by 123 » Tue Sep 18, 2018 2:41 pm

In many cases the CDs that are held in IRAs, incluidng brokerage IRAs) have provisions that they can be liquided without penalty upon the death of the account holder (prior to their normal maturity). You may want to check with Schwab and see if that provision applies to the CDs in the account. In most cases, with todays rising interest rates, it makes sense to liquidate existing CDs, particularly if it can be done wihout any monetary disadvantage. From my experience the liquidation happens as of the date the liquidation is actually performed, it is not retroactive to the date of death of the account holder.
The closest helping hand is at the end of your own arm.

retiringwhen
Posts: 463
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: $4900.00 INHERITED IRA

Post by retiringwhen » Tue Sep 18, 2018 2:58 pm

livesoft wrote:
Tue Sep 18, 2018 12:18 pm
I have such an inherited IRA. I didn't cash it out. It is actually trivially simple to have the custodian figure out and send one the RMD every year. My RMD is even less than $200, but I have it sent to me on on the birthday of my mother and we use the money to go out to a nice dinner.
+1

Post Reply