Is it best to cash out an inherited IRA or keep it?

Question

Is it best to cash out an inherited IRA or keep it?

Answer 1

The best thing is generally (depending on your age) to keep it and stretch it out as long as possible.  That way it will grow tax-deferred. You can change what the investment is, however.  You just roll it into another investment of your choice.

Answer 2

roll it over for your retirement

Answer 3

First of all you need to be aware of a few things.  If you are the spouse of the deceased then you have more options than a non-spousal beneficiary.  If you are a non-spousal beneficiary then the best option will always be th keep it and stretch the withdrawals over time - this will theoretically reduce the tax burden on the beneficiary.  If you cash out there could be taxes due - and they are ALL paid in the year you took the withdrawal.  Where as stretching takes small amounts over your life expectancy and  will lower the taxes over time.

The real answer depends on this - if its a small amount under a few $1000 then no big deal.  But if we are talking over $100,000 then stretch it.

Good luck,

VP