- An IRA is designed to help people save money for retirement, so in most cases, you cannot withdraw money before you reach 59 1/2 without incurring an early withdrawal penalty of 10 percent in addition to regular withdrawal taxes. If you inherit an IRA, however, you are allowed to take withdrawals from the account without penalty, regardless of your age.
- If you are under 18, you can take up to $950 from your inherited IRA tax-free. If you take an additional $950 from the account, it will be taxed at the rate of 10 percent. If you withdraw more than $1,900 during a single year, any amount you withdraw over this number will be taxed at your parents' tax rate. For example, if your parents' income tax bracket is 33 percent, your withdrawals over $1,900 will be taxed at 33 percent.
- If you wish, you can withdraw the entire amount from your inherited IRA at one time or you can take periodic distributions, withdrawing only a portion of the money each year. You do not have to pay tax on the money until you actually withdraw it, so if the amount you inherit is more than $1,900 and your parents have a relatively high tax bracket, you may be able to save money if you wait until you are 18.
- You may not be able to wait until you are 18 to begin taking withdrawals from your inherited IRA. If the person you inherited the account from was at least 70 1/2 before he died, you will be forced to take begin taking distributions from the account the year you inherit it. The amount of money you will have to withdraw each year is based on the minimum distribution requirements the person you inherited the account from was subject to before he died. Calculating this amount can be complicated, so you may need to have your accountant help you determine how much you are required to withdraw from your inherited account.
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