Case Study: Sue Inherited an IRA Account

Sue inherited an IRA from someone other than her spouse and there are special rules that govern withdrawals. That impacts how she should invest that money. Regardless of how old Sue is, she will have to take mandatory distributions in the year following the death of the donor.

Sue needs clarity on what her RMD is. Since the penalty for not taking a large enough withdrawal is 50%, Sue should set up an automatic withdrawal. If I was working with Sue, I’d also schedule an annual review to make sure the RMD amount is calculated accurately. I would also talk to Sue about her other investments to get a sense of how risk averse she is. Once I understand that and her ultimate financial objectives, I would make recommendations as to how best to invest that money.

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This case study is for general information only. This is not intended to be used as the basis for decision-making. You should speak to a qualified professional before making any investment decisions.