Inherited IRA

annie1956May 31, 2010

I have an inherited IRA from my mother that was set up at a local bank (where she had the IRA). We are now in the process of changing banks. Can I move the IRA? If so, how & where would be the best place to put it?

thanks

A

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sushipup1

If it gets moved, it gets 'rolled over' to a new account. You can put the IRA into anything that pleases your fancy. Schwab or Vanguard, and put it into a variety of funds within each. Interest bearing accounts aren't doing a lot right now. A Vanguard (family of mutual funds) account would give you access to a number of investments within the account. Schwab, OTOH, is a full brokerage, so you can add individual stocks. Go to another bank, if you just want to invest in CDs.

The important thing is to make your choice and let the new investing agency make all the transfers for it. It will be painless. As for WHAT to invest in, that's been anything but painless recently!

    Bookmark   May 31, 2010 at 10:23AM
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jkom51

Be aware you will probably pay a fee for closing out the IRA and moving it. Standard stuff, just so you know. Banks tends to charge higher management fees than a good discount brokerage, and offer a generally poorer choice of funds to pick from.

If you are scared of the market and want to keep the money in CDs, check out the bank they are currently held at as to how their rates compare against the competition. The website http://cdrates.bankaholic.com/ shows you rates and can sort by term, but they do not verify the financial health of the bank. Do some homework here and pick a bank thatÂs safe even if not the highest fractional return. A lot of banks are in trouble but the FDIC doesnÂt publish that list so it can be hard to find out if a bank is real danger of being taken over.

If you don't know how to move an IRA I would certainly not classify you as someone who should be investing in individual stocks! Mutual funds (stocks aka equities) and short-term bond funds would be a better investment.

To move an account, open an account at any brokerage or financial institution  theyÂll usually let you do it on-line  first. See my caveats below about proper titling. THIS IS IMPORTANT! Once the account is active (entered into the system), the brokerage/FI will contact your motherÂs bank and get the funds transferred over. You do not and should not ever have to Âtouch the funds.

Schwab ranks high for customer service and widest variety of available funds. Vanguard is discount but you can only invest in Vanguard funds - they have some very good ones but also some real dogs with similar names so it can be tricky. There's an analyst who posts on-line and he specializes in Vanguard funds only, with interesting analyses of why one fund is a good investment but another similar Vanguard might not be. This is fascinating reading but more than you probably want to do.

Similar to Vanguard but with several funds ranked highly by Money magazine for overall return in their recent survey is T. Rowe Price. You might want to check the Money magazine website to read the full results of the survey article. Fidelity is the biggest pension funds broker/manager but I donÂt consider them the best from a funds standpoint.

Caveats:
The 2 critical things about Inherited IRAs are titling and distributions. You can have IRS difficulties if either of these is messed up. Wherever you move your IRA to, stay on top of these issues, because the IRS considers it your responsibility, no one else's.

Titling an Inherited IRA: NEVER combine an Inherited IRA with your personal IRA funds. The title of the account should be: "Inherited IRA deceasedname fbo yourname". So if I inherit an IRA from my mother, it is titled "Inherited IRA Susan B. Anthony fbo JKom51". FBO means 'for benefit of' and it is acceptable to use the acronym.

- Distributions must continue if your mother was taking them, but they are calculated on your life expectancy.

    Bookmark   May 31, 2010 at 6:06PM
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terriks

I have an inherited IRA, and the rules are very tricky about changing them.

I cannot stress how important this is - from jkom's post:

Caveats:
The 2 critical things about Inherited IRAs are titling and distributions. You can have IRS difficulties if either of these is messed up. Wherever you move your IRA to, stay on top of these issues, because the IRS considers it your responsibility, no one else's.

Titling an Inherited IRA: NEVER combine an Inherited IRA with your personal IRA funds. The title of the account should be: "Inherited IRA deceasedname fbo yourname". So if I inherit an IRA from my mother, it is titled "Inherited IRA Susan B. Anthony fbo JKom51". FBO means 'for benefit of' and it is acceptable to use the acronym.

When I received mine I was 47, and it was determined that my life expectancy was 94. I am required to take a distribution of 1/47 of the value of the account yearly.

    Bookmark   June 1, 2010 at 4:25PM
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annie1956

Thanks for the info - I had tried finding info on moving it and did find out that it was different from regular IRA's which is why I asked. Not a regular "rollover". I knew about the "name/titling". I also read that I have to do it within the first year? Fortunately my bank right now isn't charging any fees for it - but it isn't getting any great interest at all. I have another Inherited IRA already at Vanguard (thanks to Mom) so I don't want to move it there & have two at the same place. I have my company retirement/IRA's at Fidelity. So I may look at Schwab or T Rowe Price.
And yes - I do have to take the minimum withdrawals - already checked the worksheet on the IRS website for the calculation.
Thanks a bunch. (Even thought I LOVE numbers it does get a bit confusing).
A

    Bookmark   June 2, 2010 at 8:37AM
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jkom51

Why would you not want to open a second Inherited IRA at Vanguard? The higher your overall account balances total, the better chance you have of hitting the higher 'breakpoints' and getting an increasing discount on fees and services. This is a good thing, not a bad thing!

Split your portfolio allocation between the two accounts and it'll be easier to figure out how to rebalance each year.

    Bookmark   June 3, 2010 at 1:27PM
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annie1956

Thanks jkom - hadn't thought of it that way - just diversifying it more. Already have them discounting fees with the no paper statement route. I'll give them a call.

    Bookmark   June 5, 2010 at 8:10AM
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