The Spousal Choice

by Joe on September 2, 2013

Men, on average, live about 5-7 years less than women. So, for purposes of this discussion, we’ll look at the choices when a woman inherits her deceased husband’s IRA.

It’s a unique decision. When an IRA is inherited from a spouse, you have the choice of treating it an an inherited IRA or treating it as your own. There are pros and cons to each type of account, and the wrong decision can cost you.

Inherited IRA

  • If you are under 59-1/2, the inherited IRA permits withdrawals with no penalty, just tax at your marginal rate. Well, it’s more than permits, there’s actually an RMD, a required minimum distribution.
  • If more than the RMD is desired, still no penalty, just tax. This can potentially tide you over until your normal retirement funds are available to you.

IRA moved to your name

  • Your heirs will have the ability to take withdrawals over their lifetime vs using your withdrawal schedule for the inherited IRA approach.
  • Since the IRA is in your name, you have the opportunity to convert to Roth. This strategy may help save you the potential tax on your social security income or simply help with long term tax planning. Your heirs will certainly appreciate the ability to take their withdrawals with no income tax due.

Too often, I’ve seen a young person pass away and the broker/advisor quickly move the funds into the survivor’s IRA, as if there were no choice. Then, until the surviving spouse is 59-1/2 any withdrawals are subject to 10% penalty in addition to the tax due. Be aware of your options. There’s no right choice, except for your own circumstance.

1 comment

SEP-IRA vs. Solo 401(k) – Know the retirement plans

August 26, 2013

Today, RothMania’s first guest post. Thanks, Rick, for sharing with my readers – Many small business owners are trying to find additional tax deduction plans. The most feasible deduction is funding of a comfortable retirement plan which helps you to save a lot of money. Now, the two most accepted plans are SEP-IRA and Solo […]

Read the full article →

I missed my RMDs – What now?

August 21, 2013

At my main site,, the article that has attracted the most comments and questions is Inheriting or Bequeathing an IRA. The rules are tough enough to understand that I frequently get a question after the fact. That is, after a mistake was made. On to the question I recently received – Thank you for […]

Read the full article →

Dave on the Roth Conversion

July 16, 2013

The question seemed simple enough. A reader asked The David if after paying off all non-mortgage debt, and having the suggested 3-6 month emergency fund, a Roth conversion of his $100K IRA made sense. Dave answers, warning that the conversion will cost about $25K in tax and this money should be available, not taken from […]

Read the full article →

Morbid Tax Tricks

July 1, 2013

Death. Taxes. The cliché says neither can be avoided. A good planner will advise his clients to arrange their affairs in a way that minimizes taxes for the family, especially when the end is near. I’ve shared the strategy of Topping off your bracket with a Roth Conversion. This transaction can help reduce the tax […]

Read the full article →