November 18, 2014 Published by Lindsay Bourkoff

The death of a beloved spouse is often the most painful and emotionally taxing event of a lifetime. Among the nearly limitless emotional, practical, and financial questions it creates, it presents the grieving spouse with a complex choice about inheriting the decedent’s retirement plan.

We wanted to share an informative article about inheriting your spouse’s IRA written by Jeffrey Levine, CPA. Understanding the nuances is especially important if you are younger than 59 ½. As you may know, generally speaking, withdrawing funds from an IRA prior to reaching 59 ½ will result in a 10% penalty.

Here’s the problem: What if you lose your spouse when you’re young and need to access their IRA funds? In most cases, the best option is to open an “Inherited IRA” account. This account will allow the surviving spouse to take penalty-free distributions from the decedent’s IRA. On the other hand, if a young (pre-59 1/2) surviving spouse combines the deceased spouse’s IRA with her own, she would lose the ability to take penalty-free distributions. As always, please let us know if you have any questions about this rule, or are going through an important life transition yourself. Here’s the full article:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual, nor intended as tax or legal advice. Tax provisions are subject to change. Please consult your tax advisor or attorney to discuss these matters.