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Inherited IRA or a roth IRA?
At the age of 20 I inherited 8,000. In order to keep the full amount. I need an Ira. It is from a 401k from a job that a relative worked at. I do not need the money yet but would like to have access when ever needed without having to pay a high deduction for emergence's. Others said go with the Roth because I am so young and might get a traditional account when ever I get a job. (right now not working and in school). Others also say get a Traditional Ira and I can change my mind down the road. Do you know which one you suggest that would be better for me??
If so thank you
2 Answers
- Anonymous1 decade agoFavorite Answer
Its really a tax issue. If you convert it to a Roth or just take the money, you will have to pay taxes (but no penalties) on any money you get. If you put it into a Inherited IRA, you will have to take a small minimum mandatory distribution each year and can stretch out your taxes that way.
$8k is not much, so taxes on the whole thing will likely be low. And with a small account that shrinks every year, you may get annual charges from IRA customdian. I would probably just pay the taxes and keep life simple.
- Anonymous1 decade ago
I think you should go for a Roth IRA. The earnings grow tax free and if you had to take the money out you can get to the principal without paying penalties (though I would recommend not doing that so it will grow large amounts in the future).