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Editor of Kiplinger\u2019s Retirement Report, Rachel Sheedy joins Joe Anderson, CFP\xae and Alan Clopine, CPA to discuss inherited IRA (individual retirement account) rules & strategies for beneficiaries. Plus, how to become an extreme saver in 2017. Original publish date January 7, 2017 (hour 1). Note that content may be outdated as rules and regulations have changed.

Important Points:

04:43 \u201cLet me recap on 2016 \u2013 I have a year-end report here. We had a rocky start in the beginning of the year\u2026the first month was the first January in the history of the stock market\u2026\u201d

07:46 \u201cAlmost half of the gains happened in just a few weeks - that\u2019s why timing markets is so incredibly difficult. No one guessed this.\u201d

08:37 \u201cBe fully diversified and make sure that you have the right risks at the right times given your specific goals\u2026to wrap up 2016, it was a wild ride \u2013 there were a heck of a lot of different things that happened but at the end of the year if you stayed true to your investment strategy, you probably ended up with a decent year.\u201d

Joe: (11:57) \u201cWhat are some things that you\u2019re writing about that people should be aware of?\u201d

Rachel: (12:00) \u201cThere are definitely some key points that heirs really need to be aware of that can really maximize an inherited IRA\u2026a big key is\xa0[looking at if there] are there different rules for spousal beneficiaries of an IRA versus non-spouse beneficiaries. Spousal beneficiaries have a lot of leeway \u2013 they can essentially take the account as their own. Non-spouse beneficiaries can\u2019t do that. They\u2019ve got more rules that they need to pay attention to.\u201d

12:30 \u201cOne of the key things they need to know is that they need to re-title the account\u2026they need to re-title it as an inherited IRA and make sure that their name and the decedent\u2019s name are listed when they re-title it to make sure they know who is who \u2013 that\u2019s step number one.\u201d

Joe: (13:06) \u201cThat\u2019s right, it has to stay in the decedent\u2019s name or it could really blow up on them.\u201d

Rachel: (13:10) \u201cThat\u2019s definitely a move people should not make, they should not roll that inherited account over into their own if they\u2019re a non-spouse beneficiary. They need to re-title it as an IRA.\u201d

Joe: (13:20) \u201cWhen it comes to spouses, what would you talk about in regards to keeping it in the decedent\u2019s name or rolling the decedent spouse into their own?\u201d

Rachel: (13:32) \u201cOne of the big things is whether the surviving spouse is younger than 59 \xbd. If they\u2019re younger than 59 \xbd and they need that money, if they keep that account as a beneficiary they can cap it without having to pay the early withdrawal penalty, and that\u2019s true for any beneficiary that\u2019s capping a traditional IRA.\u201d

Al: (16:47) \u201cThe rules are so complicated when it comes to IRAs\u2026if you\u2019re not the spouse then you have to start taking required minimum distributions and a lot of people don\u2019t realize it even if you\u2019re 20 years old you\u2019ve got to start taking a required minimum distribution.\u201d

Rachel: (17:13) \u201cRight, that\u2019s a key point. If you want to be able to keep that IRA alive and be able to stretch it out for potentially decades, you need to start taking required distributions. You can also take out more if you wanted to, but if you take out that minimum amount you can keep that IRA going.\u201d

Al: (17:31) \u201cThat\u2019s also true for Roth IRAs, because the account owner doesn\u2019t have to take a required distribution but a non-spouse beneficiary does, although it\u2019s tax-free."

Rachel: (17:46) \u201cRoth IRA heirs need to realize that they\u2019ve got to take distributions even though the owner didn\u2019t, but the distributions will be tax-free \u2013 they are taxable income if it\u2019s a traditional IRA.\u201d

Joe: (18:00) \u201cRachel, this is great information. Where can our listeners get more information about you and read up on what you\u2019re currently doing?\u201d

Rachel: (18:06) \u201cKiplinger.com is a great resource if you go to the retirement section our cover shows up there. You can search by different topics \u2013 IRAs, Social Security, etc.\u201d

20:02 \u201cThese are mistakes that we see those people 55 years and older making, and mistake number one is underestimating longevity.\u201d

24:05 \u201cIf you find it impossible to save, start at least small \u2013 just get the ball rolling.\u201d

33:31 \u201cAnother thing that people don\u2019t think about is the taxation of saving accounts because there are different places to save. You can save in your 401(k) or 403(b) if you have one, you can save in your trust account, savings account, you can save into a Roth IRA or a Roth provision in your 401(k) or 403(b).\u201d