Inherited IRA withdrawal

[NotEasy]

Taxpayer received a distribution from the 401(K) of his deceased father as a beneficiary and he rolled the distribution into an inherited IRA.

Does he have to wait until 59 1/2 years old to withdraw the money in order to avoid the early withdrawal penalty?

[appelman]

I believe that is correct...

Possibly subject to exceptions. Also, the RMD rules for inherited IRA's will apply.

[Kram BergGold]

Rolled or Direct Transfer

First, by rolled, I assume you mean the institution in charge of the funds created an inherited IRA and directly transfered it from decedent to beneficiary. If so, then any withdrawals will be coded with a 4 (death) and there will be no penalties. However, if the beneficiary got a check and then deposited it into an IRA you have big problems.

[Gary2]

Normally with an inherited IRA, the beneficiary (other than a spouse) has to start taking money immediately. Depending on circumstances, they either calculate an RMD for each year or else have to take out the entire amount within five years. There's no early withdrawal penalty, but waiting until 59 1/2 is not an option.

I'm not sure about how soon you need to take money out of an inherited 401(k), but I'm pretty sure that waiting until 59 1/2 is likewise not an option.

[appelman]

Oops, I was a little too fast.

I seem to have said two contradictory things, and the first is wrong. Kram and Gary are right. There is no penalty, and age 59 1/2 really doesn't come into it.