What to Do With a Small Inherited IRA ($10k-$50k)

With a smaller inherited IRA, you have the same legal options as a large one, but the calculus is different:

• **Cash out immediately:** Pay taxes this year, simplify your life
• **Spread over 10 years:** Lower annual tax hit, but ongoing complexity
• **Convert to inherited Roth:** Pay tax now, tax-free growth going forward
• **Wait until year 10:** Defer taxes but get a larger bill at the end

For small inherited IRAs, cashing out often makes sense.

• **Pros:** One-time tax payment, no annual tracking, no RMD calculations
• **Cons:** All taxed as ordinary income this year
• **Best if:** You're in a low tax bracket, or the amount won't push you up significantly
• **Tax example:** $30,000 inherited IRA in 22% bracket = ~$6,600 tax

You can take $3,000-$5,000 per year to minimize tax bracket impact.

• **Pros:** Lower annual tax hit, continued tax-deferred growth
• **Cons:** 10 years of tracking, potential for forgetting
• **Best if:** You're in a high bracket now but expect lower income later
• **Example:** $30,000 over 10 years = $3,000/year = minimal tax impact

You can convert an inherited traditional IRA to an inherited Roth IRA.

• **How it works:** Pay ordinary income tax on conversion amount, then growth is tax-free
• **Still subject to 10-year rule:** Must still empty by year 10
• **Best if:** You expect tax rates to rise, or want tax-free growth
• **For small amounts:** May not be worth the complexity

Once you've taken distributions (and paid taxes), you have flexibility:

• **Taxable brokerage:** Invest in stocks, bonds, ETFs
• **Pay off debt:** High-interest debt especially
• **Emergency fund:** If you don't have 6 months of expenses saved
• **Physical gold:** Tangible asset outside the financial system
• **Roth IRA contribution:** If you have earned income, contribute separately