Can an Inherited IRA Be Rolled Over?

If you inherit an individual retirement account (IRA) from a spouse, you can treat it like your own IRA or roll it over into a traditional IRA that you already have. If you are the beneficiary of an IRA inherited from someone other than your spouse, the options are different. You can’t roll it over into an existing IRA. However, you can transfer it into a new IRA, if you satisfy certain requirements. In either case, failing to follow the rules can result in the IRA being treated as a taxable distribution.

A financial advisor can guide you as you inherit an IRA or receive another windfall.

Inheriting an IRA From a Spouse

The owner of an IRA can designate anyone to be the beneficiary of an IRA or other retirement account after the owner’s death. When inheriting an IRA from a spouse, beneficiaries often have more flexibility compared to non-spousal heirs. Spouses can choose from several options to manage the inherited funds – including a rollover – allowing them to align the account with their financial goals and retirement plans.

1. Roll the IRA Over to an Existing IRA That You Own

The surviving spouse can roll the inherited IRA over into an existing IRA that they own. This can be a traditional IRA or, after conversion, a Roth IRA. Any taxable distributions can be rolled over into another plan, such as a qualified employer retirement plan like a 401(a) or 403(b) annuity plan or a state or local government’s 457(b) deferred compensation plan.

If the rollover route is selected, it can be accomplished by a direct trustee-to-trustee transaction. Or it can be done by taking the funds from the account as a distribution and then depositing the funds into another IRA within 60 days. Waiting longer than 60 days to re-deposit the funds into an IRA risk having the distribution taxed like income.

The most desirable way is to use the direct trustee-to-trustee transaction. This can be set up in advance if the wishes of the original owner regarding the inheritance are known.

Similarly, the surviving spouse can also name themselves as the owner of IRA (instead of rolling it over). In this event, it will be as if the surviving spouse had always owned the account. The same distribution rules will apply for taking money out of the account as it would if you would have opened the account yourself at its inception.

The age of the beneficiary determines how the inherited funds will be taxed. That means, for instance, any pre-tax distributions before age 59 ½ will get charged a 10% penalty in addition to being subject to income taxes. Starting at age 73 (as of 2023), the beneficiary will have to start taking the annual required minimum distributions (RMDs), although the RMD age will rise to 75 in 2034.

However, if the deceased spouse had already reached RMD age, the surviving spouse would follow that RMD schedule, instead of their own.

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About This Calculator

This calculator estimates RMDs by dividing the user's prior year's Dec. 31 account balance by the IRS Distribution Period based on their age. Users can enter their birth year, prior-year balances and an expected annual return to estimate the timing and amount of future RMDs.

For IRAs (excluding Roth IRAs), users may combine balances and take the total RMD from one or more accounts. For 401(k)s and similar workplace plans*, RMDs must be calculated and taken separately from each account, so balances should be entered individually.

^*The IRS allows those with multiple 403(b) accounts to aggregate their balances and split their RMDs across these accounts.

Assumptions

This calculator assumes users have an RMD age of either 73 or 75. Users born between 1951 and 1959 are required to take their first RMD by April 1 of the year following their 73rd birthday. Users born in 1960 and later must take their first RMD by April 1 of the year following their 75th birthday.

This calculator uses the IRS Uniform Lifetime Table to estimate RMDs. This table generally applies to account owners age 73 or older whose spouse is either less than 10 years younger or not their sole primary beneficiary.

However, if a user's spouse is more than 10 years younger and is their sole primary beneficiary, the IRS Joint and Last Survivor Expectancy Table must be used instead. Likewise, if the user is the beneficiary of an inherited IRA or retirement account, RMDs must be calculated using the IRS Single Life Expectancy Table. In these cases, users will need to calculate their RMD manually or consult a finance professional.

For users already required to take an RMD for the current year, the calculator uses their account balance as of December 31 of the previous year to compute the RMD. For users who haven't yet reached RMD age, the calculator applies their expected annual rate of return to that same prior-year-end balance to project future balances, which are then used to estimate RMDs.

This RMD calculator uses the IRS Uniform Lifetime Table, but certain users may need to use a different IRS table depending on their beneficiary designation or marital status. It's the user's responsibility to confirm which table applies to their situation, and tables may be subject to change.

Actual results may vary based on individual circumstances, future account performance and changes in tax laws or IRS regulations. Estimates provided by this calculator do not guarantee future distribution amounts or account balances. Past performance is not indicative of future results.

SmartAsset.com does not provide legal, tax, accounting or financial advice (except for referring users to third-party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States). Articles, opinions and tools are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. Users should consult their accountant, tax advisor or legal professional to address their particular situation.

2. Keep the Account as an Inherited IRA

Alternatively, spouses can choose to keep the account as an inherited IRA, which maintains the original account structure. This option is particularly beneficial if the surviving spouse is younger than 59 ½ and may need access to the funds without incurring early withdrawal penalties.

RMDs are required based on either the original account holder’s schedule or the surviving spouse’s life expectancy. While this approach offers flexibility for withdrawals, it doesn’t allow new contributions or the ability to defer RMDs.

Inheriting From a Non-Spouse

If you inherit an IRA from someone other than your spouse, you typically cannot treat the account as your own or roll it into an existing IRA. Furthermore, you cannot make additional contributions to an inherited IRA.

Instead, the account must remain an inherited IRA subject to specific rules and limitations. It’s important to note that recent changes under the SECURE Act of 2019 and the SECURE Act 2.0 of 2022 have significantly impacted how non-spouse beneficiaries must manage inherited IRAs.

Before the SECURE Act, non-spouse beneficiaries could “stretch” these mandatory distributions from an inherited IRA over many years using their own life expectancy. However, under the first SECURE Act, most non-spouse beneficiaries are required to empty the account account within 10 years of the original owner’s death. This rule applies to both traditional and Roth IRAs and replaces the previous option to stretch distributions over the beneficiary’s lifetime.

In addition to emptying the account within 10 years, the IRS confirmed in July 2024 that starting in 2025, non-spouse beneficiaries must take annual RMDs from their inherited IRA if the original owner had reached RMD age at the time of their death.

Exceptions to the 10-Year Rule

Eligible designated beneficiaries (EDBs) are exceptions to the 10-year rule. This category includes minor children of the deceased, individuals who are disabled or chronically ill and beneficiaries who are no more than 10 years younger than the original account holder. EDBs can take RMDs based on their life expectancy. However, minor children must transition to the 10-year rule upon reaching the age of majority.

Other Options for Inherited IRAs

However, there is another options. Instead of opening an inherited IRA, the person who inherited the IRA can take a lump sum distribution. Even if the person is younger than 59 ½, the distribution won’t be subject to the usual 10% penalty for an early withdrawal. However, the distributed funds will be subject to income taxes immediately upon withdrawal.

The beneficiary can also disclaim their inheritance, effectively refusing the inherited IRA. This legal process allows the account to pass to the next eligible beneficiary, typically outlined in the original account holder’s beneficiary designation.

For beneficiaries who do not need the funds and wish to avoid triggering RMDs and associated taxes, disclaiming allows the next beneficiary to assume control and manage the timeline for withdrawals.

Bottom Line

Inheriting an IRA from a spouse means the beneficiary simply name themselves as the new owner of the account and treat it as if it had been theirs all along. Likewise, the surviving spouse can roll the funds into their own IRA. If the heir is someone other than a spouse, the usual approach is to set up an inherited IRA,

Sometimes it might make more sense to disclaim an inherited IRA if, for example, the inherited funds would mean the beneficiary’s estate would be so large it would incur the federal estate tax. In the event an IRA is disclaimed, the funds would go to other beneficiaries named on the account.

Tips for Handling IRAs

A financial advisor can help you manage retirement accounts that you inherit from loved ones. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Consider using a retirement calculator to estimate how much you may need to save each year to live the retirement you want.