Inherited IRA

annie1956

16 years ago

I have an inherited IRA from my mother that was set up at a local bank (where she had the IRA). We are now in the process of changing banks. Can I move the IRA? If so, how & where would be the best place to put it?

thanks

A

Sort by:Oldest

Comments (6)

sushipup1
16 years ago
If it gets moved, it gets 'rolled over' to a new account. You can put the IRA into anything that pleases your fancy. Schwab or Vanguard, and put it into a variety of funds within each. Interest bearing accounts aren't doing a lot right now. A Vanguard (family of mutual funds) account would give you access to a number of investments within the account. Schwab, OTOH, is a full brokerage, so you can add individual stocks. Go to another bank, if you just want to invest in CDs.

The important thing is to make your choice and let the new investing agency make all the transfers for it. It will be painless. As for WHAT to invest in, that's been anything but painless recently!
jakkom
16 years ago
Be aware you will probably pay a fee for closing out the IRA and moving it. Standard stuff, just so you know. Banks tends to charge higher management fees than a good discount brokerage, and offer a generally poorer choice of funds to pick from.

If you are scared of the market and want to keep the money in CDs, check out the bank they are currently held at as to how their rates compare against the competition. The website http://cdrates.bankaholic.com/ shows you rates and can sort by term, but they do not verify the financial health of the bank. Do some homework here and pick a bank thatÂs safe even if not the highest fractional return. A lot of banks are in trouble but the FDIC doesnÂt publish that list so it can be hard to find out if a bank is real danger of being taken over.

If you don't know how to move an IRA I would certainly not classify you as someone who should be investing in individual stocks! Mutual funds (stocks aka equities) and short-term bond funds would be a better investment.

To move an account, open an account at any brokerage or financial institution Â theyÂll usually let you do it on-line Â first. See my caveats below about proper titling. THIS IS IMPORTANT! Once the account is active (entered into the system), the brokerage/FI will contact your motherÂs bank and get the funds transferred over. You do not and should not ever have to ÂtouchÂ the funds.

Schwab ranks high for customer service and widest variety of available funds. Vanguard is discount but you can only invest in Vanguard funds - they have some very good ones but also some real dogs with similar names so it can be tricky. There's an analyst who posts on-line and he specializes in Vanguard funds only, with interesting analyses of why one fund is a good investment but another similar Vanguard might not be. This is fascinating reading but more than you probably want to do.

Similar to Vanguard but with several funds ranked highly by Money magazine for overall return in their recent survey is T. Rowe Price. You might want to check the Money magazine website to read the full results of the survey article. Fidelity is the biggest pension funds broker/manager but I donÂt consider them the best from a funds standpoint.

Caveats:
The 2 critical things about Inherited IRAs are titling and distributions. You can have IRS difficulties if either of these is messed up. Wherever you move your IRA to, stay on top of these issues, because the IRS considers it your responsibility, no one else's.

Titling an Inherited IRA: NEVER combine an Inherited IRA with your personal IRA funds. The title of the account should be: "Inherited IRA deceasedname fbo yourname". So if I inherit an IRA from my mother, it is titled "Inherited IRA Susan B. Anthony fbo JKom51". FBO means 'for benefit of' and it is acceptable to use the acronym.

- Distributions must continue if your mother was taking them, but they are calculated on your life expectancy.
Related Discussions
Judgments & Inheritance
Q
Comments (19)
Well, God gave me computer issues for a reason. Let me form a more PC response. First, I don't give a tinker's damn what you'd tell your own daughter. I'm grateful I'm not yours and feel sympathy for anyone with such a judgmental parent. Second, I pray your daughter never, ever finds herself in the same situation or straits I've been working through. No one needs the kind of betrayal, fear, struggle, or what you'd probably smugly call "character building". That said. I'm not trying to get out of this judgment, I'm trying to pay what I can up front, preserving the small capital I might have, while still IN COURT trying to hold my ex-POC DH responsible for the 1/2 of $643000 he's trying to weasel out of. There stands your finagler. As I believe I might have mentioned, opinions are as common as elbows. If you have nothing constructive with which I can educate myself, please keep it to yourself. But I'm glad I could provide you with a moment of moral superiority. I hope that wasn't too PC to make myself clear. This post was edited by CEFreeman on Mon, Sep 16, 13 at 22:49
...See More
inheritance tax - how much we will pay?
Q
Comments (28)
bob_cville brings up an important point which the rest of us had overlooked. As more and more people inherit 401k's and IRAs, it is critical to understand that one needs to make the correct decision in such a case, BEFORE the funds are distributed. For our parents this was not an issue, the grandparents of Boomers didn't have these type of accounts. However, for us and succeeding generations, it is incumbent upon us to be aware not only of the current laws, but any future changes that will made in those laws by Congress. If you are inheriting any portion of an IRA, it's important that you know whether or not the owner was taking distributions. Once distributions are begun, they MUST be continued by the heirs. An IRA passed to multiple heirs may be split in any proportion the owner has specified. The heirs are best served by opening up a new IRA. Titling of this new IRA is very specific to avoid IRS problems. I've excerpted part of a WSJournal article on this issue: "...Inherited IRAs don't work like regular IRAs. If you inherit an IRA from anyone other than your husband or wife, you can't roll it into your own IRA. And you can't consolidate IRAs you inherit from different people into one account. So, if the heir had withdrawn the assets from a parent's IRA and deposited them into her own IRA, she would have undone the inherited IRA, making all its assets taxable. She also would have to remove any assets she deposited in her IRA above her allowed IRA-contribution limit for the year -- $5,000 if she's under 50, or $6,000 if she's 50 or older -- to avoid further penalties. But it appears that the account in question was left as is, except for being improperly titled. Thus, the error should be considered an administrative one that can be fixed. The reader would need to retitle the IRA so it's clear that the owner died and that she is the beneficiary. Ed Slott, an IRA consultant in Rockville Centre, N.Y., recommends using this format: John Smith IRA/ Deceased 1/1/2009/ FBO Mary Smith as beneficiary. (note: FBO means "for the benefit of") Make sure that the financial institution gets the titling right not only on the statements it sends to you, but also on the internal records it uses for reports to the IRS, he says. Some large IRA custodians use the beneficiary's name on the statements sent to him or her, but use the formal titling (as in the "John Smith" example, above) on the information it sends to the IRS to avoid confusing beneficiaries. After you have retitled the inherited IRA, you can stretch out withdrawals from the account across your lifetime, rather than being forced to withdraw the funds sooner. That gives you a chance to extend the time that tax-deferred earnings can accrue, possibly increasing your inheritance."
...See More
Horrible credit but can do minimum 50% down
Q
Comments (28)
housenewbie, That's a sound idea because if they don't do something like that there may be no money for them when they retire. quirkyquercus, As I said before it's almost impossible to find a home under $300k around here. I would be afraid of the neighborhood if they found one or, it would be such a fixer that they could have problems that way. They have paid off all of their bills and are currently debt free. Pamghatten, Taking your advice, would they be better off NOT putting down as large a down payment as they intended to do? If it doesn't help to lower the rate but also doesn't increase the rate...then they would be better served placing it into a CD. talley sue nyc, Their financial income (or lack of it) started their problem but their bad financial decisions have also kept them there. One of the things DH and I talked to them about was perhaps buying a small 3 apartment complex where they could live in part of it and receive income on the other two units. DS (thanks I was calling her SIL!) doesn't want to go that route because they've always lived in apartments. She wants her own home and I cannot blame her. terriks, thank you very much for the link. I have not check it out yet, but I will pass this along to them. kudzu9, I think that is wise to hire a financial advisor for a year or so. DH has had our guy for over 20 years! It might really help them to understand how to manage their money better. One thing I have to say is I'm surprised myself that they have now taken a more wait and see attitude with the money and are not acting as though it is burning a whole in their pockets. It brings hope to the picture.
...See More
Financial advice?
Q
Comments (23)
Hi, I love to cook ... hope you're still around. Learning how money works is an interesting hobby ... and it pays well! How about making a visit to your local library? Many of them have some good resources on managing money and investing. Ours carried a good resource from the U.S. until recently, called "Value Line". Someone spoke of the Kiplinger resources in the U.S. and I feel that they offer good value. The Motley Fool people, advisors related to the stock market in the U.S. for years, at www.fool.com, began operations in Canada recently, and I read their material occasionally. As for how to proceed, I like to have some funds fairly quickly available on hand, in case of emergency. I don't like to carry "credit" card (really "debt" card) debt, as their rates are so high, and I pay off balances owing monthly. For years I've had a line of credit at the bank, usually secured by assets, for lower rate of interest. As to whether to pay down mortgage, compare the rates of return on potential investments compared to the interest rate on the mortgage, after tax in each case - mortgage interest rates in Canada aren't deductible (but capital gain on owner-occupied home is tax-free). I was born just before the Dirty Thirties, that major depression. Dad had a larger than usual farm near a village called Lambeth in southern Ontario, and I learned from him to be careful with money, to manage it wisely. I was 10 when World War II started, in 1939, for Canadians, and soon our hired help had gone to war, so what Dad and this teen-ager and a couple of younger boys got done - got done, for the next few years: the rest ... didn't. We got an allowance throughout the year, and Dad paid us for our work in the summer, just before school started ... and we were to buy what clothes and books, etc. we needed. We found it wise not to blow our wages, as sometimes through the year the allowance didn't cover what we felt we needed ... so it was good to have a cushion. After taking the courses that stockbrokers take, something over 30 years ago, I sold mutual funds, for a brokerage, not a company where they sold only funds managed by their company ... but didn't sell enough to suit my employer, so was "decommissioned". I've bought some (mainly stock-based) mutual funds, paying a commission on purchase, that have paid amounts each year, which have been reinvested in that fund. The management companies charge a management fee annually, part of which is paid as a trailer fee to the guy who sold the funds to me in the first place, as compensation for his ongoing financial guidance ... or to his manager, if he's no longer there. Don't hear from them much. Some of the funds have produced a better rate of return than others. I bought some stock in a Canadian bank, about 50 years ago, for $4.25 per share, paying about 15 cents a year dividend, and don't remember whether the tax rate on Canadian dividends was lower then than on interest earnings, which in Canada are taxed at top rate. Back around 2007 each share could be sold for about $107, and paid $3.08, at low tax rate. Later, involved some in the financial fiasco in 2008, the share price dropped to about $40 and the dividend stayed at the same rate for upwards of three years. The share price has recovered, now runs around $120. per share, and I said a few years ago that I hoped it would pay me each year what I'd paid in the first place ... granted, about 50 years ago, when each dollar bought more: it's now $5.44. I've paid not one cent to any agency to manage them for me. For something like 20 years I've attended a monthly meeting locally, one of about 45 across Canada, of subscribers of what many of us feel to be Canada's best financial advisory magazine, totally committed to their subscribers, as they don't carry ads. Usually about a dozen and a half attend, and I've learned a good deal about investing from them. Good wishes for learning about how to invest wisely. ole joyful .
...See More
terezosa / terriks
16 years ago
I have an inherited IRA, and the rules are very tricky about changing them.

I cannot stress how important this is - from jkom's post:

Caveats:
The 2 critical things about Inherited IRAs are titling and distributions. You can have IRS difficulties if either of these is messed up. Wherever you move your IRA to, stay on top of these issues, because the IRS considers it your responsibility, no one else's.

Titling an Inherited IRA: NEVER combine an Inherited IRA with your personal IRA funds. The title of the account should be: "Inherited IRA deceasedname fbo yourname". So if I inherit an IRA from my mother, it is titled "Inherited IRA Susan B. Anthony fbo JKom51". FBO means 'for benefit of' and it is acceptable to use the acronym.

When I received mine I was 47, and it was determined that my life expectancy was 94. I am required to take a distribution of 1/47 of the value of the account yearly.
annie1956
Original Author
16 years ago
Thanks for the info - I had tried finding info on moving it and did find out that it was different from regular IRA's which is why I asked. Not a regular "rollover". I knew about the "name/titling". I also read that I have to do it within the first year? Fortunately my bank right now isn't charging any fees for it - but it isn't getting any great interest at all. I have another Inherited IRA already at Vanguard (thanks to Mom) so I don't want to move it there & have two at the same place. I have my company retirement/IRA's at Fidelity. So I may look at Schwab or T Rowe Price.
And yes - I do have to take the minimum withdrawals - already checked the worksheet on the IRS website for the calculation.
Thanks a bunch. (Even thought I LOVE numbers it does get a bit confusing).
A
jakkom
16 years ago
Why would you not want to open a second Inherited IRA at Vanguard? The higher your overall account balances total, the better chance you have of hitting the higher 'breakpoints' and getting an increasing discount on fees and services. This is a good thing, not a bad thing!

Split your portfolio allocation between the two accounts and it'll be easier to figure out how to rebalance each year.
annie1956
Original Author
16 years ago
Thanks jkom - hadn't thought of it that way - just diversifying it more. Already have them discounting fees with the no paper statement route. I'll give them a call.

Inherited IRA

Comments (6)

sushipup1

jakkom

Related Discussions

terezosa / terriks

annie1956
Original Author

jakkom

annie1956
Original Author

COMPANY

BUSINESS SERVICES

GET HELP

CONNECT WITH US

Inherited IRA

Comments (6)

sushipup1

jakkom

Related Discussions

terezosa / terriks

annie1956Original Author

jakkom

annie1956Original Author

COMPANY

BUSINESS SERVICES

GET HELP

CONNECT WITH US

annie1956
Original Author

annie1956
Original Author