FREE NEWSLETTER
I was recently informed that I will be a non-spousal beneficiary of an Inherited Roth IRA. My understanding is that I will have no required RMDs, but will be required to empty the account by the end of a ten-year period. I will have no need for these funds for that period so I will let them remain untouched until I’m required to take a total withdrawal. But how should they best be invested over that ten-year certain period? The conventional investing wisdom directs me to be in stocks if I have that length of time. Though with each passing year that investing horizon shortens…. eventually to the point where I would like to be reasonably assured that I have significantly more money to withdraw than what I inherited.
Not withstanding the variable 10-year glidepath philosophies offered by financial firms, is investing in a 10-year target date fund an appropriate strategy for reaching my goal? This 10-year withdrawal requirement is a more recent update to the Secure Act, so no one has yet reached the 10-year time limit. How are you investing your Inherited Roth IRA? Or, if you were to inherit one, what investment strategy would you employ?
i am sorry there was a typo in my poasting. I typed “Bio” instead of Bil’,
Bio: It is always nice to inherit a roth ira. At the end of the 10 year period if the market is down at the time you should transfer the roth ira investment to a non ira fund of the to non ira fund of the same kind.
Also consider if you plan for the inheritance to remain invested after the tax-free 10 year growth period. At 10 years, you could do a full or partial in-kind (non-cash) distribution, allowing you to transfer assets into a taxable account. I too would keep the Roth for the 10 years, but I would begin thinking how to structure the investments for longer term if I didn’t need to sell.
Thanks for this suggestion. If I understand you correctly, if I see holding these funds for a longer timeframe (say a total of 20 years), I might keep fully invested in stocks for the initial 10-year period. Then there is a financially-legal mechanism that would allow me to keep my stock assets and move them into a taxable account. This would eliminate the need to cash out my stocks in the Roth IRA and then purchase stocks in a taxable account.
I don’t think it makes much difference whether you transfer in kind or sell and repurchase. Maybe just transaction costs.