How to Avoid Big Inherited IRA Mistakes

In this week’s Hidden Wealth Reviews, I teach how to avoid big, inherited IRA mistakes. This tax trap is affecting more and more families. This is one of the most misunderstood and costly problems in retirement planning. Be sure to read all the way down through this timely information and do not miss the link to download my eye-opening list of “The Biggest Mistakes with Inherited IRAs.”

Many people believe they’re doing the right thing by funding traditional 401(k)s and IRAs and leaving their retirement savings to their children or other non-spouse beneficiaries. But, because many people don’t understand the inherited IRA’s impact or the tax rules, their children could end up paying the highest tax rates on the IRAs they inherit! The truth is that inherited IRAs can become massive tax burdens if not handled properly. Sadly, we’re seeing more and more families fall into this tax trap.

We recently worked with a couple in their mid-fifties. They had inherited a $300,000 IRA from the wife’s mother. They live in Colorado, which has a state income tax. They’re also in their peak earning years, making about $350,000 annually. On paper, things looked good. But, because the wife’s mother had already begun taking required minimum distributions (RMDs) before her death, the IRS now requires non-souse inheritors to start taking inherited RMDs immediately! Our Colorado couple’s required withdrawal is just over $10,000 for the first year.

Since they’re in a high tax bracket, that $10,000 withdrawal was taxed at over 36%. To make matters worse, you cannot convert an inherited IRA to a Roth IRA unless you’re the spouse of the original owner. That means there’s no way to make this money tax-free. Once inherited, you’re stuck with an IRA’s tax bill. On top of that, there can be a severe penalty for missing a distribution.

It’s no wonder families feel confused, isolated and powerless. But there is a way to avoid an inherited IRA disaster.

The key is proactive tax planning as opposed to reactive tax reporting. According to one of the leading tax journals, 99% of tax professionals do tax preparation, not tax planning. That means most people are not getting the advice they need to save taxes and avoid future tax problems before they happen.

When you have the right guidance in the form of CPAs, CFPs and Wealth Strategists who actually do tax planning, not just tax preparation, you can finally:

1. Remove your retirement savings from the tax system.
2. Prevent your children from inheriting a tax bill.
3. Learn how to use smart timing and smart strategies.
4. Reduce or eliminate future tax burdens.
5. Use the current Tax Cuts and Jobs Act (still in effect through 2025) to your advantage.

When the markets are down is an excellent time to convert your traditional IRAs to Roth IRAs, in order to avoid the many tax traps built into traditional IRAs. Because the account balance you convert will be less, this will reduce the tax impact of the conversion.

Stocks nosedived this week after President Donald Trump unveiled sweeping tariffs. U.S. stocks cratered on Thursday in their worst one-day sell-off since 2020, with the Dow tumbling almost 1,700 points. After China retaliated with new tariffs on U.S. goods, The Dow Jones Industrial Average dropped another 2,231 points Friday. With the market’s downturn, it’s good to remember the Warren Buffet quote, “Be fearful when others are greedy and be greedy when others are fearful.”

However, this current time of market correction is an ideal time to start planning your tax strategy. Planning beats reacting every single time and the time to plan is now!

When it comes to inherited IRA taxes, most families are flying blind. By the time many of them discover the truth, it’s often too late. But you don’t have to be one of them. The market correction conditions into which we’re headed following President Trump’s tariff announcement, present the perfect opportunity to get a strategic tax and wealth plan, starting with a S.T.O.P. Analysis.

STEPS TO AVOIDING INHERITED IRA MISTAKES

Here’s how to take that first step:

1. Visit TaxesSaved.com – This is where you’ll request your S.T.O.P. Analysis.
2. Select a Date and Time – Be specific! Choose a date and time to speak with us so we can assess your tax-saving opportunities.
3. Show Up and Learn Your Tax Risk – We’ll walk you through the exact steps you can take to eliminate unnecessary taxes and keep more of your money.

If you filed a tax extension for 2024, there’s still time to save on your taxes. But you’ve got to act fast! With the Tax Cuts and Jobs Act set to expire after 2025, the window to save the most tax is closing.

Your taxes won’t fix themselves. You can choose to pay more than you need to or you can plan smarter and pay less. Turn market tanking tariffs into a tax savings tariff turnaround.

You work hard for your money; you earn it and you diligently save it. Don’t lose it, don’t give it away to taxes and don’t let your children inherit a tax burden. Keep more, protect more and leave behind a legacy, not a liability.

Visit TaxesSaved.com and request your S.T.O.P. Analysis today!

Click below to download my eye-opening list of “The Biggest Mistakes with Inherited IRAs.”

Note: We serve Baby Boomers and Retirees all over the Unites States. We have an efficient, supported process to meet online, as we have been doing for over 20 years. Our online meetings are private, the access is restricted and we never share our meeting link with anyone who’s not a part of the meeting.

Chuck Oliver
Wealth Strategist | Best-Selling Author
We help Baby Boomers and Retirees thrive in retirement through a clear retirement road map that provides market correction and tax protection to optimize income and assets!
www.TheHiddenWealthSolution.com