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These big inherited IRA mistakes can shrink your windfall

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1 year ago

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If you’ve inherited an individual retirement account, you may have big plans for the balance — but costly mistakes can quickly shrink the windfall, experts say.

Many investors roll pre-tax 401(k) plans into traditional IRAs, which trigger regular income taxes on future withdrawals. The tax rules are complicated for the heirs who inherit these IRAs.

The average IRA balance was $127,534 during the fourth quarter of 2024, up 38% from 2014, based on a Fidelity analysis of 16.8 million IRA accounts as of Dec. 31.

But some inherited accounts are significantly larger, and errors can be expensive, said IRA expert Denise Appleby, CEO of Appleby Retirement Consulting in Grayson, Georgia.

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Here are some big inherited IRA mistakes and how to avoid them, according to financial experts. 

What to know about the ’10-year rule’

Before the Secure Act of 2019, heirs could empty inherited IRAs over their lifetime to reduce yearly taxes, known as the “stretch IRA.”

But since 2020, certain heirs must follow the “10-year rule,” and IRAs must be depleted by the 10th year after the original account owner’s death. This applies to beneficiaries who are not a spouse, minor child, disabled, chronically ill or certain trusts.

Many heirs still don’t know how the 10-year rule works, and that can cost them, Appleby said.

If you don’t drain the balance within 10 years, there’s a 25% IRS penalty on the amount you should have withdrawn, which could be reduced or eliminated if you fix the issue within two years.

Inherited IRAs are a ‘ticking tax bomb’

For pre-tax inherited IRAs, one big mistake could be waiting until the 10th year to withdraw most of the balance, said certified financial planner Trevor Ausen, founder of Authentic Life Financial Planning in Minneapolis.

“For most, it’s a ticking tax bomb,” and the extra income in a single year could push you into a “much higher tax bracket,” he said.

Similarly, some heirs cash out an inherited IRA soon after receiving it without weighing the tax consequences, according to IRA expert and certified public accountant Ed Slott. This move could also bump you into a higher tax bracket, depending on the size of your IRA.

“It’s like a smash and grab,” he said.

Rather than depleting the IRA in one year, advisors typically run multi-year tax projections to help heirs decide when to strategically take funds from the inherited account.

Generally, it’s better to spread out withdrawals over 10 years or take funds if there’s a period when your income is lower, depending on tax brackets, experts say. 

Many heirs must take RMDs in 2025

Starting in 2025, most non-spouse heirs must take required minimum distributions, or RMDs, while emptying inherited IRAs over 10 years, if the original account owner reached RMD age before death, according to final regulations released in July.

That could surprise some beneficiaries since the IRS previously waived penalties for missed RMDs from inherited IRAs, experts say.

While your custodian calculates your RMD, there are instances where it could be inaccurate, Appleby explained.

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For example, there may be mistakes if you rolled over a balance in December or there’s a big age difference between you and your spouse.

“You need to communicate those things to your tax advisor,” she said.

Generally, you calculate RMDs for each account by dividing your prior Dec. 31 balance by a “life expectancy factor” provided by the IRS.

If you skip RMDs or don’t withdraw enough in 2025, you could see a 25% IRS penalty on the amount you should have withdrawn, or 10% if fixed within two years.

But the agency could waive the fee “if you act quickly enough” by sending Form 5329 and attaching a letter of explanation, Appleby said.

“Fix it the first year and tell the IRS you’re going to make sure it doesn’t happen again,” she said.

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$20,000 Caution Bond Requirement for US Visa Applications imposed on 50 Countries

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6 days ago

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August 8, 2026

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The United States Department of State has officially implemented a revised visa policy introducing a mandatory posting requirement for caution payments of up to $20,000 on select foreign travel applications. Under the updated regulatory framework, consular officials are authorized to require temporary nonimmigrant visa applicants from targeted foreign countries to post a refundable financial bond of $20,000 as a condition for visa issuance. The policy mechanism is designed to address diplomatic concerns regarding high overstay rates among temporary visitor, business, and educational visa categories.

The caution bond pilot program applies selectively to foreign nationals from designated countries whose diplomatic entities record historical visa overstay rates exceeding established federal thresholds. Under administrative guidelines published by the State Department, the full financial deposit is posted directly to a dedicated federal escrow account prior to final visa issuance. The entire caution payment is automatically refunded to the applicant upon verified proof of timely departure from the United States in strict compliance with the authorized duration of stay. Conversely, failure to depart within the legal timeframe results in full forfeiture of the posted financial bond to the United States government.

Diplomatic representatives and travel policy experts have expressed varying perspectives regarding the operational implementation of the caution bond system. Administration officials emphasize that the measure serves as an effective, market-based incentive to enforce international travel compliance and preserve domestic immigration security standards. However, international trade organizations and foreign diplomatic missions have raised concerns regarding the financial burden imposed on legitimate business travelers, foreign students, and commercial partners from developing nations.

The United States finalized the rule to make the temporary visa bond program permanent, taking effect on August 3, 2026. The updated permanent regulation replaces the prior 12-month pilot, eliminates the lowest $5,000 tier, and raises the maximum required bond amount to $20,000 for specific B-1/B-2 business and tourist visa applicants.

Here is the list of the 50 countries on the list as o August 3, 2026

African Nations (31 Countries)

  • Algeria
  • Angola
  • Benin
  • Botswana
  • Burundi
  • Cabo Verde (Cape Verde)
  • Central African Republic
  • Côte d’Ivoire (Ivory Coast)
  • Djibouti
  • Ethiopia
  • Gabon
  • The Gambia
  • Ghana
  • Guinea
  • Guinea-Bissau
  • Lesotho
  • Malawi
  • Mauritania
  • Mauritius
  • Mozambique
  • Namibia
  • Nigeria
  • São Tomé and Príncipe
  • Senegal
  • Seychelles
  • Tanzania
  • Togo
  • Tunisia
  • Uganda
  • Zambia
  • Zimbabwe

Asian & Eastern European Nations (11 Countries)

  • Bangladesh
  • Bhutan
  • Cambodia
  • Georgia
  • Kyrgyzstan
  • Mongolia
  • Nepal
  • Papua New Guinea
  • Tajikistan
  • Turkmenistan
  • Uzbekistan

Caribbean & Latin American Nations (5 Countries)

  • Antigua and Barbuda
  • Cuba
  • Dominica
  • Grenada
  • Venezuela

Oceanian Nations (3 Countries)

  • Fiji
  • Tonga
  • Vanuatu

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Next-Generation Retirement Planning: Managing Longevity Risk and Variable Income Streams

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1 week ago

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August 7, 2026

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Retirement planning strategies are evolving in 2026 to address increased life expectancies, shifting dynamic market conditions, and the transition away from traditional defined-benefit pensions. Individual investors and financial advisors are abandoning rigid retirement models in favor of flexible, multi-asset strategies designed to mitigate longevity risk and preserve purchasing power over multi-decade retirement horizons.

Mitigating Longevity Risk with Dynamic Asset Allocation
As average life expectancies extend past eighty-five years, one of the primary financial risks facing retirees is outliving their accumulated wealth. Traditional fixed income allocations—such as the standard 60/40 equity-to-bond portfolio—are being reevaluated to ensure portfolios generate sufficient capital growth alongside reliable income.

Financial planners recommend maintaining a meaningful equity allocation throughout retirement to offset long-term inflation erosion. High-dividend equity funds, global real estate investment trusts (REITs), and inflation-indexed Treasuries are combined to create diversified portfolios that deliver both growth and income stability.

The Transition to Dynamic Withdrawal Strategies
The classic “4% safe withdrawal rule” is increasingly replaced by dynamic withdrawal strategies that adapt annually based on market performance. Under a dynamic withdrawal framework, retirees adjust their annual distribution rates within pre-set caps and floors:
– Market Upside: During strong market returns, retirees can increase discretionary spending or fund family legacy gifts.
– Market Downturns: During market pullbacks, spending distributions are temporarily reduced to prevent sequence-of-returns risk and preserve core investment principal.

Guaranteed Lifetime Income Options and Deferred Annuities
To establish a guaranteed baseline for essential living expenses, individuals are incorporating modern fixed-indexed and deferred longevity annuities into their broader retirement architectures. Modern annuity structures offer competitive return caps, transparent fee schedules, and inflation-adjustment options.

By funding essential expenses—such as housing, healthcare, and insurance—with guaranteed income streams from Social Security, pensions, and annuities, retirees can manage discretionary investment portfolios with greater flexibility and lower emotional stress during market volatility.

Actionable Steps for Future Retirees
1. Calculate Baseline Retirement Expenses: Determine fixed living costs and map guaranteed income sources to cover essential expenditures.
2. Adopt Flexible Withdrawal Rules: Implement dynamic spending rules to protect investment principal against market downturns.
3. Incorporate Inflation-Protected Assets: Maintain exposure to dividend-growing equities and inflation-indexed bonds to safeguard long-term purchasing power.

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Personal Finance

Building Generational Wealth: Family Governance, Estate Tax Optimization, and Asset Protection

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2 weeks ago

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August 1, 2026

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As the largest intergenerational transfer of wealth in history accelerates, high-net-worth families, entrepreneurs, and individual investors are placing heightened emphasis on comprehensive estate planning, family governance, and asset protection. Preserving capital across generations requires a balanced approach combining tax-efficient legal structures with open family communication and financial literacy education.

Optimizing Estate Tax Exemptions and Trust Structures
With potential modifications to federal estate tax exemption thresholds on the horizon, proactive estate planning is essential for high-net-worth households. Estate planning attorneys and wealth advisors are establishing multi-generational trust structures to transfer wealth efficiently while minimizing estate and gift tax exposure.

Popular structural strategies include:
– Irrevocable Life Insurance Trusts (ILITs): Utilizing life insurance proceeds to provide liquidity for estate tax obligations without expanding the taxable estate.
– Grantor Retained Annuity Trusts (GRATs): Transferring rapidly appreciating assets to beneficiaries with minimal gift tax consequences.
– Dynasty Trusts: Preserving wealth across multiple generations while providing long-term asset protection from creditor claims and legal liabilities.

Establishing Family Governance and Financial Education
Legal and financial structures alone cannot guarantee long-term wealth preservation without effective family governance. Financial advisors report that a significant percentage of multi-generational wealth dissipation stems from lack of communication and inadequate financial preparation among heir generations.

Families are establishing formal family governance frameworks, including periodic family meetings, written mission statements, and structured philanthropic foundations. Involving younger family members in charitable grant-making and investment discussions fosters financial stewardship and prepares heirs to manage family assets responsibly.

Digital Asset Custody and Legacy Planning
In today’s modern economy, estate planning must extend beyond physical real estate and traditional brokerage accounts to encompass digital assets. Comprehensive estate plans now include detailed inventories and legal access protocols for corporate domain names, intellectual property, digital media rights, and cryptocurrency holdings.

Fiduciaries and estate executors should be provided with secure, encrypted access mechanisms and clear legal authority to manage and transfer digital holdings in accordance with the owner’s estate directions.

Practical Steps for Legacy Planning
1. Review and Update Estate Documents: Ensure wills, revocable trusts, and power-of-attorney designations accurately reflect current family structures.
2. Establish Structured Trusts: Utilize irrevocable trusts to protect assets from creditors and minimize future estate tax liabilities.
3. Create a Digital Estate Inventory: Document access protocols and legal permissions for all online accounts, intellectual property, and digital assets.

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