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If you are the beneficiary of an inherited IRA, avoid immediately withdrawing the money. If you make an immediate withdrawal, you might forfeit the tax-deferred status of the account and be subject to paying taxes. A proper withdrawal strategy for an inherited IRA can minimize your tax bill….(read more)

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When you inherit an IRA, it can be a great way to build wealth and save for retirement, but it can also be a source of confusion and frustration. To ensure that you make the most of your inherited IRA, it’s important to avoid making any costly mistakes.

One of the most common mistakes people make with an inherited IRA is failing to properly name the beneficiary. It’s important to make sure that the beneficiary designation form is properly filled out and that it matches the name of the person who will be inheriting the IRA. If there is a discrepancy between the two, it could result in the IRA being distributed to the wrong person.

Another mistake to avoid is failing to take the required minimum distributions (RMDs). When you inherit an IRA, you are required to take RMDs, which are based on your age and the amount you have in the account. If you fail to take the required RMDs, you could be subject to a hefty penalty, so it’s important to make sure that you are taking the required distributions each year.

It’s also important to avoid making any changes to the inherited IRA. When you inherit an IRA, you are not allowed to make changes to the account, such as transferring money out or making any investments. Doing so could result in the account being disqualified, which could result in taxes being owed on the entire balance of the IRA.

Finally, it’s important to be aware of the tax implications of an inherited IRA. Depending on the type of IRA you inherit, you may be required to pay taxes on the distributions. It’s important to be aware of the tax implications and to make sure that you are taking the necessary steps to ensure that you are paying the correct amount of taxes.

Inheriting an IRA can be a great way to save for retirement, but it’s important to make sure that you are avoiding any costly mistakes. By following the tips above, you can ensure that you are making the most of your inherited IRA.