Inherited IRAs

Retirement Plans & Inherited IRAs: What You Need to Know (Before It’s Too Late)

Retirement planning is more than picking a savings account—it’s about making tax-smart decisions based on your career, business structure, and future goals. And when someone passes away, it’s equally important to understand how inherited retirement accounts are handled.

Let’s break it all down—whether you're building your nest egg or navigating an inheritance.

💼 401(k) Plans: A Cornerstone for Corporate Employees

401(k)s are powerful, employer-sponsored retirement plans. Employees can contribute pre-tax or after-tax (Roth) dollars, and many employers match contributions.

• 2025 Contribution Limit: $23,500 (+ $7,500 catch-up at 50+, or $11,250 more if age 60–63)

• RMDs begin at age 73 (or at retirement, if allowed and not a 5%+ owner)

• Tax-Deferred Growth or Tax-Free Withdrawals (Roth)

Pro Tip: Always contribute enough to get the employer match—it’s free money.

🏫 403(b) Plans: Ideal for Educators & Nonprofits

The 403(b) functions similarly to a 401(k), but is offered only to public schools and nonprofit employees. It includes additional catch-up perks for long-term employees.

• Same contribution limits as a 401(k)

• Unique 15-year rule: extra contributions for employees with long service

• Same RMD and early withdrawal rules

Watch Out: Investment options are often more limited than in 401(k)s, so make sure you’re comparing fees.

📈 412(e)(3): Retirement Power for High-Income Small Business Owners

This fully insured defined benefit plan is designed for small businesses with consistent income and a desire to maximize contributions quickly.

• Funded by annuities or life insurance

• Tax-deductible contributions can far exceed those of 401(k)/403(b)

• Offers guaranteed retirement income

• No market risk, but also no market upside

Best For: Older business owners looking to catch up on retirement fast—and lock in certainty.

🧬 Inherited IRAs: What Spouses & Heirs Must Know

When someone inherits an IRA or retirement plan, the rules change—and fast decisions are often required.

For Spouses:

• Can treat the IRA as their own (great for younger surviving spouses who want long-term growth).

• Can open an Inherited IRA and take RMDs based on their own age.

• Can take a lump sum (but watch for taxes).

• May disclaim the inheritance for estate planning purposes.

For Non-Spouses:

• Most must empty the account within 10 years.

• Some Eligible Designated Beneficiaries (like minor children or disabled heirs) can stretch payments.

• Roth IRAs are tax-free if the account was held 5+ years.

• Traditional IRAs = taxed as ordinary income.

Mistake to Avoid: Failing to take RMDs on time can lead to a 25% penalty on missed withdrawals.

🧠 The Bottom Line

From building wealth to passing it on, the right retirement plan—and knowing how to handle inherited ones—can make or break your future income and tax exposure.

Whether you’re:

• A teacher with a 403(b),

• A business owner exploring 412(e)(3),

• A professional maxing out your 401(k),

• Or a spouse who just inherited an IRA…

You need a plan that fits your life, your taxes, and your legacy goals.

📞 Ready to Maximize Your Retirement?

Don’t leave your future (or your family’s) to guesswork. I can help you choose the right plan, avoid penalties, and build income that lasts.

📅 Book your free retirement strategy session today.

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