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What Is an Inherited IRA?

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An Inherited IRA is a type of account you can open when you inherit an IRA or an employer-sponsored retirement plan (e.g., 401(k) plan) as a named beneficiary.

Opening an Inherited IRA is a common option for non-spouse beneficiaries who do not want to take a lump-sum distribution from the retirement plan they’ve inherited from the original account owner.

Unlike a Traditional or Roth IRA, you can’t make any new contributions to an Inherited IRA. This type of account can only hold your inherited funds. 

Still, an Inherited IRA could offer potential tax benefits.

For example, if you’ve inherited a retirement account, instead of taking a lump-sum distribution, you could transfer the funds into an Inherited IRA, allowing the money to remain tax-deferred. You may also have the option to spread out your distributions over a certain period of time. For more information, visit the IRS website: "Retirement Topics – Beneficiary."

Good to know: Inherited IRAs are also sometimes called "Beneficiary IRAs."

Required minimum distribution (RMD) rules

The IRS has rules when it comes to distributing funds from an Inherited IRA.

The distribution requirements depend, in part, on your relationship to the person who named you as beneficiary of their retirement account (i.e., the original account owner). Spouses and non-spouse beneficiaries have different distribution rules they must follow. 

The age of the original account owner when they passed away, as well as the year of their death, could also impact your distribution options. Visit the IRS for more details.

Good to know: RMD rules can be complicated, so don't hesitate to consult a financial or tax advisor to understand your obligations.

Opening an Inherited IRA

You can open an Inherited IRA through an IRA custodian, a financial institution that is able to hold the inherited funds and maintain the account for you.

Banks and brokerage firms are examples of institutions that can serve as IRA custodians. By law, IRA custodians are required to follow all regulations governing these retirement accounts.

Before opening an account, it’s a good idea to do some comparison shopping – pay attention to details such as account opening minimums, fees and investment options.

This article is for informational purposes only and shall not constitute an offer, solicitation, or recommendation to buy or sell securities, or of an account type, securities transaction, or investment strategy. This article was prepared by and approved by Marcus by Goldman Sachs®, but is not a description of any of the products or services offered by and does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA and Goldman Sachs & Co. LLC are not providing any financial, economic, legal, accounting, tax or other recommendation in this article and it is not a substitute for individualized professional advice. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.  Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA, Goldman Sachs & Co. LLC are or any of their affiliates, none of which are a fiduciary with respect to any person or plan by reason of providing the material or content herein. Neither Goldman Sachs Bank USA, Goldman Sachs & Co. LLC nor any of their affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.

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