There’s been significant buzz recently focused on the expected transfer of approximately $72 trillion (yes, trillion with a T) of personal assets in the United States over coming years from baby boomers to younger generations. While this may seem to negate the need for pre-retirees to plan for their own retirements (spoiler alert — it doesn’t), it does highlight the significant role inherited IRAs play in wealth transfers between generations.
There are two types of inherited IRAs: traditional and Roth. An inherited traditional IRA is a tax-deferred investment account that is used as the vessel to receive assets coming from another tax-deferred investment account (e.g., traditional 401(k)s and traditional IRAs). By comparison, an inherited Roth IRA is an after-tax investment account used to receive assets from a Roth 401(k) or Roth IRA.
