Education Center

If you have ever inherited an IRA or other tax-deferred retirement account, you may be familiar with the 10-year RMD rule. If you are a beneficiary but have not yet inherited a tax-deferred retirement account, you must familiarize yourself with this rule. Your relationship with the original account owner will impact the distribution rules you are subject to.

If you own a retirement account, you are probably familiar with the early withdrawal penalty. This rule states that if funds are withdrawn from a retirement account before age 59 ½, there is a 10% penalty. This applies to IRA accounts and other tax-advantaged retirement accounts like 401(k) and 403(b).

Most of your retirement savings will likely come from an employer-sponsored plan, such as a 401(k) or a 403(b). These are great savings plans for retirement because normally an employer will also match your contributions. However, just because your employer sponsors a retirement plan, doesn’t mean you should stop saving for retirement there.

If you have long-term investments, you may have large, embedded gains that can cause a pretty high tax bill. However, even though you cannot escape paying taxes on these gains, your heirs may avoid tax liability when they inherit certain assets. This gives your heirs a huge tax advantage because their cost basis is essentially reset.