What is a Spousal Inherited IRA?
Jason Stolz CLTC, CRPC
A Spousal Inherited IRA is a retirement account a surviving spouse receives after inheriting an IRA or other qualified plan. Because spouses have special rights under federal tax law, they can choose between several powerful options—each with distinct tax implications and flexibility for future withdrawals.
Understanding your choices as a spouse beneficiary is key to maximizing long-term income, reducing taxes, and maintaining control. In many cases, rolling assets into your own IRA or using an IRA direct rollover ensures continued tax deferral and keeps your retirement strategy intact.
Inherited IRA Options for Surviving Spouses
Compare rollover, transfer, and income choices to find the best strategy for your long-term goals.
Estimate Lifetime Income from an Inherited IRA
Three Primary Options for Spousal Beneficiaries
- Roll Over the IRA into Your Own: The most common choice for younger or working spouses. You become the account owner, consolidate retirement savings, and delay required minimum distributions (RMDs) until your own RMD age.
- Retitle as a Beneficiary (Inherited IRA): Keeps the account in the deceased spouse’s name “for the benefit of” you. Often useful if you need access before age 59½, since withdrawals avoid the early penalty.
- Convert to a Roth IRA: Allows future tax-free withdrawals if managed correctly. Taxes are due at conversion, but long-term flexibility and estate benefits can be substantial.
Comparison Table: Spousal IRA Options
| Option | Advantages | Considerations |
|---|---|---|
| Rollover into Your Own IRA | Continues tax deferral; combines with existing accounts; full control of investments and timing of withdrawals. | Subject to 10% early withdrawal penalty if under age 59½ and funds are accessed. |
| Inherited (Beneficiary) IRA | Avoids early withdrawal penalty; keeps access to funds if needed before retirement age. | RMDs may begin immediately depending on the decedent’s age; limited contribution ability. |
| Roth Conversion | Future withdrawals can be tax-free; ideal for long-term growth and estate transfer. | Taxes due on conversion; not ideal if near or in retirement with high current income. |
Tax Rules and RMD Timing
Your RMD schedule depends on how you choose to inherit:
- Rollover into your own IRA — RMDs start at your normal required beginning date (currently age 73 for most).
- Inherited IRA — RMDs may start immediately if your spouse was already taking them, or can be deferred until they would have turned 73.
- Roth inherited IRA — Generally no RMDs during your lifetime if rolled into your own Roth; inherited Roths require distributions if held as beneficiary.
Managing these rules strategically can help you extend tax deferral and align income with your needs. Many surviving spouses convert part of the balance into a guaranteed income annuity to balance growth and stability.
Planning Ahead: Coordinating Benefits and Income
- Sequence your accounts: Use taxable accounts first if possible, allowing IRA assets to compound tax-deferred.
- Mind survivor benefits: If your spouse had a pension, coordinate timing so new IRA withdrawals don’t increase your tax bracket unnecessarily.
- Integrate annuity income: Some spouses use a portion of the IRA for lifetime income. Review our page on guaranteed income from annuities for examples.
- Set up new beneficiaries: Once you become owner, designate your heirs and review annually.
Create an Income Plan That Honors Their Legacy
Turn inherited savings into dependable lifetime income with strategies tailored to your situation.
Talk With an Advisor Today
Choose how you’d like to connect—call or message us, then book a time that works for you.
Schedule here:
calendly.com/jason-dibcompanies/diversified-quotes
Licensed in all 50 states • Fiduciary, family-owned since 1980
FAQs: Spousal Inherited IRAs
What is a spousal inherited IRA?
An IRA inherited by a surviving spouse. Spouses have more flexibility than other beneficiaries and can roll over, retitle, or convert the funds to fit their needs.
Can a surviving spouse roll the IRA into their own?
Yes. A spouse can roll inherited assets into their own IRA to maintain full ownership and defer taxes until normal retirement age.
When should a spouse use a beneficiary IRA instead?
If under age 59½ and needing early access, keeping it as a beneficiary account avoids early withdrawal penalties.
Are taxes owed when inheriting an IRA?
There are no taxes due immediately upon inheritance, but withdrawals from a traditional IRA are taxable. Roth IRAs are generally tax-free if the 5-year rule has been met.
Can I convert an inherited IRA to a Roth?
Yes, a spouse can convert inherited funds to a Roth IRA, paying taxes now for tax-free withdrawals later. It’s not available to non-spouse beneficiaries.
When do RMDs begin for a spousal inherited IRA?
If you roll the IRA into your own, RMDs start at your required beginning date. If kept as an inherited account, they may start immediately or when your spouse would have turned 73.
Can a spousal inherited IRA be transferred to an annuity?
Yes. A direct trustee-to-trustee transfer into a qualified annuity can provide guaranteed income while maintaining tax deferral and control over distributions.
