Hey all,
Me and my wife are inheriting some money (on the order of a couple hundred grand) from my wife's father and I am a little confused about the pros/cons of getting the money in different ways. Our goals with this money after discussing what we need is to basically try to get it all at once to spend the majority of it right away. We have a major purchase coming up and both have hundreds of thousands of student loan debt (both have professional degrees) so after discussing specifics of our situation with each other and a relative who is a financial planner and discussing our specific cash flow situation etc, we decided we're gonna pay off our debt first and foremost, then finance this major purchase, then invest the rest that remains (preferably we will invest the remaining money in mixed retirement/nonretirement accounts, though if it is significantly more beneficial we could inveat it all in a retirement account if there are significant benefits.)
So basically, from my understanding, since we need to use the majority of the money right away we have two options: 1. Transfer it to an inherited IRA and 2. Take it out as a lump sum.
As far as I can surmise in our situation, the two options are pretty similar, but I keep on seeing on the websites I'm reading that there will be a bigger tax liability if we take a lump sum, but wouldn't the tax liability ultimately be the same if we took out The same amount of money from an inherited IRA? Are there any other benefits of inherited IRA versus lump sum that I'm missing besides the tax advantage?
My question boiled down is that I basically don't understand the tax benefits of keeping the money in an inherited IRA versus taking her fathers money out directly as a lump sum if we plan to use the majority of it right away and then just reinvest the remaining money after the major spending is done in 50/50 retirement/no retirement accounts.
My other question is they keep on saying there is no early withdrawal penalty for taking money out of an inherited IRA, is this unlimited? Meaning can I take out however much I want whenever I want so long as I continue to take out yearly minimum disburssements? Could I keep the money in an inherited IRA then pull out however much I need for these expenses then pull out half of what's left over to invest in nonretirement accounts therefore only paying taxes on the money I withdraw from the account when I need it?
One final question I had is, if her dads account is a traditional iRA and I chose to use the inherited IRA strategy, could I make it a Roth IRA? Me and my wife will definitely be in a higher tax bracket when we retire so our individual retirement investing from our own incomes has been with Roth IRA for that reason. Would it make sense/would it be possible to put this money in a Roth IRA account?
Also, this account is a traditional IRA and her father was older than 70 1/2 years old.
Thanks for any help or insight you can privide I really appreciate it!
Submitted June 14, 2017 at 04:51PM by NeedleDick69 http://ift.tt/2sq2duD
