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Did you inherit a retirement account?

Not sure what the next steps are? Here they are.

1) Get it into your name.

If it’s any kind of IRA (Roth IRA, Traditional IRA, Rollover IRA, SEP-IRA, etc.) you’ll often have to open an account at the company where it’s currently held. Then you’ll need a death certificate- usually an original, which aren’t that cheap, but if you put a post-it note on it, they’ll usually send it back to you. Eventually. And you’ll have to fill out their distribution form.

If it’s a 401(k) or other company retirement account, follow the directions given by the company that holds it. Usually you will need to open an IRA account someplace and after they get a copy of the death certificate and you fill out their form, they’ll send the money or assets to this IRA account.

These things usually take between 3 weeks and 2 months.

If you inherited from your husband or wife you can put it into your own name, just as though it were your own retirement account.

Everyone else will have an account title something along the lines of "Your Name, Inherited IRA" and you won't be able to combine it with your own retirement accounts- it will always have to stay separate.

2) Once it’s in your name, you can transfer it anywhere and you can manage it yourself, hire me to help you manage it, or put it into the care of a broker or assets-under-management style advisor.

Who should manage it?

Brokers and AUM advisors charge you to manage it. If you think you’ll never ever want to think about your account, hire one. If you are interested but just not sure what steps to take or how to do it, call me. If you want more information on the pluses and minuses of different kinds of account managers, see my blog post on “fee-only”.

3) You will need to "take a distribution."

You will need to take at least the "Required Minimum Distribution." Your account's new custodian can help you calculate this or I can. You will need the date of birth of the person you inherited it from.

You must take your first Required Minimum Distribution (RMD) by 12/31 of the year the person died. If you are late, the IRS will penalize you 50% of the RMD.

You can take more than the Required Minimim Distribution if you'd like.

Here is a nice page that Schwab has put together about inherited IRAs.

Inherited Roth IRAs have slightly different rules but you still have to take a minimum distribution, (even though that makes no sense).

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