Transfer your inherited retirement account to an Inherited IRA to enjoy tax-deferred growth and no early withdrawal penalty.
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An Inherited IRA, or a Beneficiary IRA, is an account that is opened when someone inherits an IRA or employee-sponsored retirement plan after the death of the original owner. As a beneficiary, you can’t make additional contributions, but with an Inherited IRA the funds can remain tax-deferred, and you can generally withdraw money right away without a penalty. Inherited IRAs are typically opened for non-spouse beneficiaries, as spouses can transfer inherited assets directly into their own personal retirement accounts (although spouses can open an inherited IRA as well if they choose).
The rules for if/when you must begin taking Required Minimum Distributions and/or distribute all the account assets depend on your beneficiary classification:
- Eligible Designated Beneficiary (spouse or minor child of the original account holder, or an individual that is disabled, chronically ill or no less than 10 years younger than the original account holder)
- Designated Beneficiary (most other individuals)
- Non-Designated Beneficiary (trusts and organizations)
There are additional nuances based on your exact relationship to the deceased, when they died, and their age at the time of their death. For more information, please read our Inherited IRA withdrawal rules page or consult your tax advisor.
Ready to get started? Read on for more account details and what you need to know before opening an Inherited IRA.
Advantages of an Inherited IRA
If you open an Inherited IRA instead of taking a lump-sum distribution, you can continue to take advantage of potential growth in a tax-advantaged account.
Withdrawals on a set schedule
Periodic distributions can be set up to reoccur automatically, including Required Minimum Distributions (RMDs) if you are required to take them.
Spreading out your IRA distributions
It may be possible to take smaller distributions over time, which can help you preserve assets longer and spread out tax liability.
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This tax information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends that you consult with a qualified tax advisor, CPA, financial planner, or investment manager. Depending on the type of account you have, there are different rules for withdrawals, penalties, and distributions. Please understand these before opening your account.
Benefits of an Inherited IRA with Schwab
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Have questions about our Inherited IRA? Here are responses to some of the most common questions we hear. If you have a specific question that's not answered here, please call us at 866-855-5635.
- What do I need to open an Inherited IRA?
- When can I access my account?
- Who is eligible to open an Inherited IRA?
- If I am a spousal beneficiary, can I treat the IRA as my own?
- If I am a non-spouse beneficiary, can I roll over the assets into one of my existing IRAs?
- If I am a non-spouse beneficiary, can I leave the assets in the existing IRA instead of opening an Inherited IRA?
- Can I make additional contributions to an Inherited IRA?
- Do I have to begin taking distributions for my Inherited IRA right away?
- Are there rules for taking distributions from my Inherited IRA?
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Open an Inherited IRA today. Call 866-855-5635 or
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