Inherited IRA vs. Traditional IRA in Olathe: Which is Right for You?
Individual Retirement Accounts (IRAs) are a great way to save for retirement, and there are several types of IRAs available. If you have inherited an IRA or are considering opening one, it's important to understand the differences between Inherited IRAs and Traditional IRAs. In this article, we'll explore the key differences between these two types of IRAs and help you determine which Inherited IRA in Olathe is right for you.
Inherited IRA
An Inherited IRA is a retirement account that you inherit from someone else, such as a parent or spouse. With an Inherited IRA, you cannot make any contributions to the account, but you are required to take distributions based on your life expectancy. The distributions are subject to income tax, but there are no penalties for early withdrawals.
One of the benefits of an Inherited IRA is that you can stretch out the distributions over your lifetime, which can provide a steady stream of income during retirement. However, if you inherit an IRA from someone who was already taking required minimum distributions (RMDs), you will be required to take distributions based on their age.
Traditional IRA
A Traditional IRA is a retirement account that you open and fund yourself. With a Traditional IRA, you can contribute up to $6,000 per year (or $7,000 if you are over age 50). The contributions are tax-deductible, and the earnings in the account grow tax-free until you withdraw them. However, when you withdraw the funds, you will be subject to income tax on the distributions.
One of the benefits of a Traditional IRA is that you have control over the contributions and investments in the account. You can choose how much to contribute each year, and you can invest in a variety of assets such as stocks, bonds, and mutual funds.
Which is Right for You?
The decision between an Inherited IRA and a Traditional IRA depends on your individual circumstances. If you have inherited an IRA, an Inherited IRA may be the best option to maximize the distributions over your lifetime. However, if you are looking to save for retirement on your own, a Traditional IRA may be a better choice because you have control over the contributions and investments in the account.
In Olathe, it's important to consult with a financial advisor to determine which type of IRA is right for you. A financial advisor can help you understand the tax implications and investment options for each type of IRA and help you create a retirement plan that meets your individual needs.
In summary, an Inherited IRA and a Traditional IRA are two different types of retirement accounts with unique benefits and drawbacks. If you have inherited an IRA, an Inherited IRA may be the best option to maximize your distributions. However, if you are looking to save for retirement on your own, a Traditional IRA may be a better choice. Consult with a financial advisor in Olathe to determine which type of IRA is right for you.
