7 things to know about inherited IRA rules

There are four main types of IRAs to choose from

Those types are traditional, Roth, SEP, and SIMPLE. While all IRAs can help you save for retirement, each type has its own tax advantages and eligibility requirements, such as employment type or income level.

An individual retirement account is a type of tax-advantaged investment account

An IRA lets individuals at most income levels invest either pre- or post-tax money for retirement. IRAs are often good solutions for people who don’t have the option to invest in a 401(k) plan—or for those who want to put even more money aside for retirement.

In most cases, if you withdraw your money from an IRA before you turn 59½ years old, you'll face a hefty 10% penalty

However, there are a few exceptions to this rule. In the case of adoption, death, terminal illness, education, homebuying, and more, you can access your funds without a strike against you. A chart outlines the different exceptions to this rule, plus the accounts to which they apply.

What's a rollover IRA?

A rollover IRA is a type of investment account that lets you move the money from an old retirement account into an IRA after you stop working for your employer. This move lets you keep your funds in a tax-deferred account without being hit with taxes, fees, or penalties. This article explains how you can roll over your money and highlights any restrictions to keep in mind. Learn more here.

Only 5 states have inheritance taxes

Unlike estate taxes, inheritance taxes paid by the beneficiary of the estate (the person who inherits the deceased person's financial assets). The federal government doesn't levy an inheritance tax, but five states do. They all have varying tax rates and rules.

Although anyone can contribute to a traditional IRA, not everyone can access its tax deductions

If you or your spouse contributes to a 401(k), you likely won’t be able to deduct your traditional IRA contributions from your taxes. On the flip side, if you don’t contribute to an employer-sponsored retirement account, you’re probably eligible for that tax deduction.

Some people roll their 401(k) into an IRA to have more control over their account

However, some argue that you could end up paying less money to invest in a 401(k) plan than you would to invest in an IRA. This article offers a list of pros and cons regarding rolling a 401(k) into an IRA.

A spousal IRA allows a working spouse to contribute to an IRA on behalf of their nonworking partner

This ensures both people can build financial security for the future. While it's not a separate account type, this provision requires couples to file a joint tax return to qualify, helping nonearning spouses save for retirement independently.

Seven early retirement lessons

After one year of retirement under his belt, financial publication Kiplinger's former editor has learned some lessons. Specifically, in this article, he shares his best early retirement advice, from when it makes sense to convert a traditional IRA to a Roth in early retirement, to how to prepare for retirement from a psychological perspective. Read more here.

Backdoor Roth IRAs are loopholes used to access the tax advantages of a Roth IRA for individuals who otherwise make too much money to qualify for one

Backdoor IRAs work by investing money into a traditional IRA, and then converting that traditional IRA to a Roth IRA.

The Roth IRA was named after Senator William V. Roth, Jr.

The Roth IRA was established by Senator William Roth in 1997 as part of the Taxpayer Relief Act. Roth IRAs differ from traditional IRAs in that they allow individuals to invest after-tax income for retirement rather than pre-tax income.

The IRS sets new contribution limits for IRAs and 401(k) plans each year

In 2024, individuals could contribute up to $7K across all their IRAs. People aged 50 and older could contribute up to $8K. For 2025, the IRS kept the same contribution limits.

Annuitants have to pay income taxes on the annuity payments they receive, unless their annuities are folded into a Roth IRA

In most other cases, annuities grow tax-deferred until annuitants start to receive payments. Those payments are then taxed as regular income. Nonqualified annuities, which are bought with after-tax dollars, have different rules.

Trusts offer ways to reduce the taxes beneficiaries pay on assets in one’s estate

People of different socioeconomic classes often decide to establish a trust to avoid certain taxes. When someone dies and leaves assets to beneficiaries in a will, those beneficiaries must pay specific taxes a trust's beneficiaries avoid. It all depends on the type of trust.

When a pension holder dies, payments are sometimes passed on to a relative

Those relatives are often the pension holder’s surviving spouses or dependents. This article offers tips from a financial expert on how to make sure your spouse is taken care of during retirement, including navigating a pension’s ultimate destination.

401(k) plans and pensions differ in who has control over the investments

With pension plans, a company contributes to an investment fund from which it distributes regular payments to a retired worker until their death. A 401(k) gives the worker control over contributions in a tax-advantaged account.

529 plan advantages include state-specific tax exemptions and more

For National 529 Day, celebrated on May 29, an expert explained the basics of 529 accounts. Outside of forced education savings, advantages include flexibility around beneficiaries (they can be changed easily), how unused funds can be rolled into a Roth IRA, and state-specific tax exemptions.

Revocable trusts are more flexible than irrevocable trusts

Irrevocable trusts are almost impossible for the grantor to change or dissolve. With a revocable trust, the grantor can alter or dissolve the trust at any time. However, there are upsides to irrevocable trusts, too—such as the fact that they’re typically not subject to estate taxes, unlike revocable trusts.

Financial rules that many FIRE followers live by include guidelines around tax efficiency and more

Many FIRE proponents follow specific financial rules, like the 4% rule, in order to achieve FIRE. They also take steps to create an efficient tax strategy and take advantage of compound interest.

Study up on capital gains basics

Common capital gains tax tips include making sure you have money set aside for your capital gains tax burden and considering making estimated payments throughout the year.

Retail investors are individuals who trade stock for themselves

Institutional investors, on the other hand, are investing for someone else. There are big differences between the two, one being that institutional investors can be granted certain special treatment (like being able to purchase IPOs right away).

History’s largest intergenerational wealth transfer is happening in the next few decades

The founder of a multifamily office firm offers lessons on how to preserve wealth for generations from a global perspective, like educating younger family members.

Learn how to invest in index funds with this step-by-step guide

There are a few questions experts suggest answering before investing in an index fund, such as your goals for your investment and the index you want to track. This article walks you through those questions to help you get started.

Different types of endowments, explained

​This Investopedia article provides a comprehensive overview of financial endowments—donations made to nonprofit institutions like universities, museums, or hospitals. It explains how endowments are structured, the various types (such as restricted and quasi-endowments), and how they are managed to support an institution's mission over time.

See a timeline of the IRS's history, including the introduction of standard deductions and the digitization of the filing process

The Commissioner of Internal Revenue was created in 1862 to take over federal tax collection after the President enacted a temporary income tax. That agency eventually became today's Internal Revenue Service.

Learn how to read a prospectus, the juicy document that any company must file with the SEC before going public.

Salvador Dalí believed he was his own dead brother, who had died nine months before he was born

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This poison ivy knowledge quiz—accompanied by photos of the plant's varied forms—may help you identify this common rash-inducing growth.

While the first exchange-traded fund (a 'basket' of different assets that can be bought and sold on a stock exchange) in the US only launched in 1993, the global ETF market has grown to more than $10T in the short time since.

The first steps to rebuilding your credit score include getting to know exactly what's on your credit report and figuring out how far you are from the '700 club,' or 'good score' range.

Warren Buffett's former professor Benjamin Graham is known as the 'father of value investing,' a strategy in which investors seek to buy stocks trading below their intrinsic worth.

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Planarian flatworms are small, aquatic worms with exceptional regenerative capabilities. When cut, the worms can regenerate multiple bodies in a matter of weeks.

Use this tool to calculate the dollar value of your parental mental load, from meal planning to coordinating after-school care, then see resources that help generate solutions.

A Yale student wrote a profound essay about the consulting industry's influence on elite college students that was published in a book of her writing after she died in a post-graduation car accident.

Apeirophobia is an overwhelming fear of living forever, perhaps stemming from the brain's inability to conceptualize an infinite life.

Despite being favored by 87% of Americans, Congress does not have term limits.

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Studies suggest when you sleep is as important as how much you get, and syncing with your circadian rhythms may lead to less fatigue and improved long-term health outcomes

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Fast-casual restaurant Chili's is experiencing a resurgence, with its parent company recently reporting a nearly 32% increase in sales, thanks to passionate Gen Z fans on TikTok.

See how Budweiser's famous Clydesdales spend their days at Warm Springs Ranch, where roughly 70 to 80 of the beer brand's giant horses can be found at any given time.