Inherited IRA Rules: What Beneficiaries Need to Know in 2026

Inheriting an Individual Retirement Account (IRA) can be a significant financial windfall, but it also comes with a complex set of rules and decisions. Many beneficiaries, already navigating a difficult time, find themselves overwhelmed by the various options, tax implications, and deadlines associated with inherited IRAs. Making the wrong choice can lead to substantial penalties, unnecessary taxes, and missed opportunities to maximize the inherited wealth. Understanding these intricate regulations is crucial for preserving and growing the assets you've received. This comprehensive guide will break down the inherited IRA rules for 2026, helping you make informed decisions to protect your inheritance and secure your financial future.

Inherited IRA Definition: An inherited IRA is a retirement account received by a beneficiary after the original owner's death, subject to specific distribution rules and tax implications that differ significantly from a personal IRA.

Understanding the Basics of Inherited IRAs

When you inherit an IRA, whether it's a traditional, Roth, SEP, or SIMPLE IRA, it's no longer treated like the original owner's account. The rules governing distributions, taxation, and even who can contribute to the account change dramatically. The primary goal of these rules is to ensure that the deferred tax benefits of the IRA are eventually realized, typically through mandatory distributions.

Types of Beneficiaries and Their Implications

The IRS categorizes beneficiaries into different groups, and your classification directly impacts the rules you must follow. Understanding your beneficiary status is the first critical step in navigating an inherited IRA.

Eligible Designated Beneficiaries (EDBs)

An Eligible Designated Beneficiary (EDB) receives the most favorable treatment under inherited IRA rules. These individuals are allowed to stretch distributions over their own life expectancy, potentially extending the tax-deferred growth for decades. The SECURE Act of 2019 significantly changed who qualifies as an EDB.

As of 2026, EDBs include:

• Spouses: A surviving spouse has the most flexibility, often having the option to treat the inherited IRA as their own.
• Minor Children of the Original Account Owner: This applies until the child reaches the age of majority (typically 21 in most states). Once they reach this age, they become a Designated Beneficiary and must follow the 10-year rule.
• Disabled Individuals: As defined by IRS regulations, generally meeting specific criteria for long-term physical or mental impairment.
• Chronically Ill Individuals: Also defined by IRS rules, typically requiring substantial assistance with daily living activities.
• Individuals Not More Than 10 Years Younger Than the Original Account Owner: This category often includes siblings or close friends who are close in age to the deceased.

If you are an EDB, you generally have the option to take distributions over your life expectancy, which can be a powerful wealth preservation strategy. Spouses have additional options, as detailed below.

Designated Beneficiaries (DBs)

A Designated Beneficiary (DB) is any individual who is not an EDB. This category includes adult children, grandchildren, nieces, nephews, and friends who do not meet the EDB criteria. For these beneficiaries, the rules are generally less flexible, primarily governed by the 10-year rule introduced by the SECURE Act.

Under the 10-year rule, the entire inherited IRA balance must be distributed by the end of the tenth calendar year following the original account owner's death. There are no annual required minimum distributions (RMDs) within this 10-year period, but the account must be fully depleted by the deadline. This means beneficiaries can choose when to take distributions within that decade, offering some tax planning flexibility. However, failing to empty the account by the 10-year mark can result in a significant 25% penalty on the undistributed amount, reduced to 10% if corrected promptly.

Non-Designated Beneficiaries (NDBs)

Non-Designated Beneficiaries (NDBs) are entities that are not individuals, such as estates, charities, or certain trusts. These beneficiaries face the least flexible inherited IRA rules and typically must liquidate the account much faster.

The distribution period for NDBs depends on whether the original account owner had started taking their own RMDs before death:

• If the owner died before their Required Beginning Date (RBD): The entire inherited IRA must be distributed by the end of the fifth calendar year following the owner's death (the 5-year rule).
• If the owner died on or after their RBD: The inherited IRA must be distributed over the remaining life expectancy of the original account owner, had they lived. This is often a shorter period than a beneficiary's own life expectancy.

It's crucial to correctly identify your beneficiary type, as this determines the applicable distribution rules and potential tax strategies.

Navigating Inherited IRA Options for Different Beneficiaries

The choices you make as an inherited IRA beneficiary can have long-lasting tax consequences. Understanding your specific options based on your relationship to the deceased is paramount.

Surviving Spouse Options

Surviving spouses have the most flexibility and generally the most advantageous options when inheriting an IRA.

Treat as Your Own IRA

The most common and often most beneficial option for a surviving spouse is to treat the inherited IRA as their own. This involves rolling over the inherited assets into an existing IRA in their name or establishing a new IRA. This option is available for both traditional and Roth IRAs.

• Benefits:
• Delayed RMDs: If the spouse is under their own Required Beginning Date (RBD), they can delay taking RMDs until they reach age 73 (as of 2026, though this age has shifted over time). This allows for continued tax-deferred growth.
• Contributions: The spouse can make new contributions to the IRA, subject to their own earned income and contribution limits. For 2026, the IRA contribution limit is expected to be around $7,000, with an additional $1,000 catch-up contribution for those age 50 and over.
• Beneficiary Designation: The spouse can name new beneficiaries for the account, restarting the distribution clock for their heirs.
• Considerations: If the spouse is older than the deceased owner and the deceased had already started RMDs, taking ownership might accelerate RMDs for the spouse. In such cases, treating it as an inherited IRA might be preferable for a period.

Inherit as a Beneficiary IRA (Stretch Option)

Alternatively, a surviving spouse can choose to keep the inherited IRA as a beneficiary IRA (also known as an "inherited IRA" or "stretch IRA"). This means the account remains in the deceased's name for the benefit of the spouse (e.g., "John Doe (deceased) FBO Jane Doe").

• Benefits:
• Early Access Without Penalty: If the surviving spouse is under age 59½ and needs funds, they can take distributions from the inherited IRA without incurring the 10% early withdrawal penalty that would apply to their own IRA. This is a significant advantage if immediate access to funds is needed.
• Delayed RMDs (if applicable): If the deceased was younger than the surviving spouse and had not yet reached their RBD, the spouse can delay RMDs until the deceased would have reached their RBD.
• Considerations: The spouse cannot make new contributions to an inherited IRA. They also cannot name new beneficiaries for the account; the next beneficiaries would be those designated by the original owner (if any) or by default rules.

Spousal Rollover Deadline

Spouses typically have until December 31st of the year following the original owner's death to complete a spousal rollover. However, it's often advisable to make this decision much sooner to avoid any confusion or missed deadlines, especially regarding RMDs for the year of death.

Non-Spouse Beneficiary Options

Non-spouse beneficiaries, including adult children, grandchildren, and other individuals, have fewer options than spouses, primarily due to the SECURE Act's 10-year rule.

The 10-Year Rule for Designated Beneficiaries

As discussed, most non-spouse individual beneficiaries are now subject to the 10-year rule. This means the entire balance of the inherited IRA must be distributed by December 31st of the tenth calendar year following the original account owner's death.

• Example: If the original owner died on June 15, 2026, the inherited IRA must be fully distributed by December 31, 2036.
• Flexibility: Within this 10-year window, beneficiaries have flexibility regarding when to take distributions. They can take everything in year one, spread it out evenly, or wait until year ten. This allows for tax planning, potentially taking distributions in lower-income years.
• No Annual RMDs (Generally): For most non-spouse designated beneficiaries, there are no annual RMDs during the 10-year period. The only requirement is to empty the account by the deadline.
• Exception for EDBs: If you are an Eligible Designated Beneficiary (EDB) and a non-spouse, you can still stretch distributions over your life expectancy. However, once a minor child EDB reaches the age of majority (21), they then become subject to the 10-year rule, with the 10-year clock starting from the date of the original owner's death.

Inherited Roth IRA Rules

Inherited Roth IRAs follow similar distribution rules to traditional inherited IRAs, but with a significant tax advantage: qualified distributions are tax-free.

• For Spouses: Can treat it as their own Roth IRA, allowing tax-free growth and distributions in retirement, and avoiding RMDs during their lifetime.
• For Non-Spouse Designated Beneficiaries (10-year rule): The 10-year rule applies. All distributions must be taken by the end of the tenth year. However, if the Roth IRA was established and funded for at least five years before the first distribution, all withdrawals by the beneficiary are tax-free. This makes an inherited Roth IRA a powerful tax-free income stream.
• For Non-Designated Beneficiaries (5-year rule or owner's life expectancy): The same distribution deadlines apply, but distributions are tax-free if the Roth IRA meets the five-year rule.

The tax-free nature of Roth IRA distributions makes them particularly attractive for beneficiaries, even with the accelerated distribution schedules.

Trust as Beneficiary

When a trust is named as the beneficiary of an IRA, the rules become significantly more complex. The treatment depends on whether the trust qualifies as a "look-through" or "see-through" trust.

Look-Through Trust Requirements

For a trust to qualify as a look-through trust, allowing the beneficiaries of the trust to be treated as the beneficiaries of the IRA for distribution purposes, it must meet several IRS criteria:

• The trust must be a valid trust under state law.
• The trust must be irrevocable or become irrevocable upon the death of the IRA owner.
• The beneficiaries of the trust must be identifiable from the trust instrument.
• The trust document must be provided to the IRA custodian by October 31st of the year following the IRA owner's death.

If these conditions are met, the oldest beneficiary of the trust is generally used to determine the distribution period. If all trust beneficiaries are individuals, the 10-year rule or life expectancy rule (for EDBs) would apply, based on the trust beneficiaries' status.

Non-Look-Through Trusts

If a trust does not meet the look-through requirements, it is treated as a non-designated beneficiary. This means the IRA will be subject to the 5-year rule (if the owner died before their RBD) or the owner's remaining life expectancy (if the owner died on or after their RBD). This often results in a much faster liquidation of the IRA and accelerated tax payments.

Due to the complexities, it is highly recommended to consult with an estate planning attorney and a financial advisor if a trust is named as an IRA beneficiary.

Tax Implications and Planning Strategies

Understanding the tax implications of an inherited IRA is critical for effective planning. Distributions from traditional inherited IRAs are generally taxable income.

Income Tax on Distributions

• Traditional Inherited IRA: Distributions are typically taxed as ordinary income at the beneficiary's marginal tax rate in the year they are received. This is why the 10-year rule for non-spouses offers tax planning flexibility – beneficiaries can choose to take distributions in years when their income might be lower, potentially falling into a lower tax bracket.
• Roth Inherited IRA: Qualified distributions are tax-free. If the Roth IRA has been open for at least five years, all distributions to the beneficiary are tax-free. This makes Roth inherited IRAs incredibly valuable.
• State Income Tax: Remember that state income taxes may also apply to inherited IRA distributions, depending on your state of residence.

Estate Tax vs. Income Tax

It's important to distinguish between estate tax and income tax.

• Estate Tax: The federal estate tax applies to very large estates (above $13.61 million per individual in 2026). If the inherited IRA is part of an estate subject to federal estate tax, the value of the IRA is included in the taxable estate. However, beneficiaries do not pay estate tax directly; the estate pays it.
• Income in Respect of a Decedent (IRD): Inherited IRAs are considered Income in Respect of a Decedent (IRD). This means the assets were earned by the deceased but not yet taxed. When you receive distributions, you pay income tax on them. If the estate also paid federal estate tax on the IRA, beneficiaries may be eligible for an income tax deduction for the portion of the estate tax attributable to the IRA (the "IRD deduction"). This prevents double taxation.

Planning Strategies for Non-Spouse Beneficiaries (10-Year Rule)

For non-spouse beneficiaries subject to the 10-year rule, strategic planning can significantly reduce the tax burden.

• Spread Out Distributions: Instead of taking a lump sum, consider spreading distributions evenly over the 10-year period. This can help keep annual income lower and potentially avoid pushing you into higher tax brackets.
• "Balloon" Distribution: If you anticipate a period of lower income (e.g., sabbatical, early retirement, unemployment), you might take a larger "balloon" distribution in that year to utilize a lower tax bracket.
• Roth Conversion (Original Owner): While not directly an inherited IRA strategy, it's worth noting that if the original owner had converted their traditional IRA to a Roth IRA, the beneficiaries would receive tax-free distributions, avoiding this planning complexity.
• Charitable Giving: If you are charitably inclined, you can take distributions and donate them to charity. This can offset your taxable income. For those 70½ or older, a Qualified Charitable Distribution (QCD) from your own IRA can satisfy RMDs and be tax-free, but this doesn't directly apply to inherited IRAs.

Planning for Eligible Designated Beneficiaries (Life Expectancy)

EDBs who can stretch distributions over their life expectancy have a powerful tool for long-term wealth accumulation.

• Maximize Tax-Deferred Growth: By taking only the required minimum distributions (RMDs) each year, you allow the majority of the inherited assets to continue growing tax-deferred (or tax-free for Roth IRAs) for many years.
• Re-evaluate Annually: Your RMD amount will change each year based on your age and the remaining account balance. Ensure you calculate and take the correct amount to avoid penalties.
• Investment Strategy: With a longer time horizon, you may consider a more growth-oriented investment strategy within the inherited IRA, balancing risk and potential returns.

Key Deadlines and Penalties

Missing deadlines or failing to adhere to distribution rules can result in significant penalties.

Required Beginning Date (RBD)

The Required Beginning Date (RBD) is the date by which an IRA owner must start taking RMDs from their own traditional IRA. As of 2026, the RBD is April 1st of the year following the year in which the IRA owner turns age 73.

• Impact on Beneficiaries: Whether the original owner died before or after their RBD significantly impacts the distribution rules for non-designated beneficiaries (estates, non-qualifying trusts).
• Died Before RBD: 5-year rule for NDBs.
• Died On or After RBD: Distributions over the owner's remaining life expectancy for NDBs.

10-Year Rule Deadline

For non-spouse designated beneficiaries, the entire inherited IRA balance must be distributed by December 31st of the tenth calendar year following the original owner's death.

• Penalty for Failure: If the account is not fully distributed by this deadline, the undistributed amount is subject to a 25% excise tax penalty. This penalty can be reduced to 10% if the failure is corrected within a specified period and certain conditions are met. This is a substantial penalty and underscores the importance of tracking this deadline.

5-Year Rule Deadline

For non-designated beneficiaries (e.g., estates, non-look-through trusts) where the original owner died before their RBD, the entire inherited IRA balance must be distributed by December 31st of the fifth calendar year following the original owner's death.

• Penalty for Failure: Similar to the 10-year rule, failure to meet this deadline can result in a 25% (or 10%) excise tax penalty on the undistributed amount.

First RMD for Eligible Designated Beneficiaries

Eligible Designated Beneficiaries (EDBs) who choose to stretch distributions over their life expectancy must begin taking RMDs by December 31st of the year following the original owner's death.

• Penalty for Failure: If an EDB fails to take their RMD by the deadline, the amount that should have been distributed is subject to the 25% (or 10%) excise tax penalty.

Year of Death RMD

If the original IRA owner died on or after their RBD and had not yet taken their RMD for the year of death, the beneficiary is responsible for taking that RMD. This RMD must be taken by December 31st of the year of death.

• Penalty for Failure: Failure to take the deceased's RMD for the year of death can also result in the 25% (or 10%) excise tax penalty.

Setting Up and Managing an Inherited IRA Account

Once you understand the rules, the next step is to properly set up and manage the inherited IRA. This process typically involves working with the IRA custodian.

Opening an Inherited IRA Account

You cannot simply transfer the inherited assets into your existing IRA. You must open a new account specifically designated as an inherited IRA. This account will be titled in a specific way to reflect its inherited status.

• Proper Title: The account should typically be titled something like: "[Deceased Owner's Name] FBO [Your Name], Beneficiary." This distinguishes it from your personal IRAs and ensures the correct rules are applied.
• Required Documentation: The custodian will require a death certificate, proof of your identity, and documentation confirming your beneficiary status (e.g., a copy of the deceased's IRA beneficiary designation form or will).
• Timeliness: While there isn't a strict deadline for opening the account, it's best to do so promptly, especially if the deceased had RMDs due for the year of death or if you are an EDB needing to start your own RMDs.

Investment Options and Management

An inherited IRA generally offers the same investment options as a regular IRA, including stocks, bonds, mutual funds, exchange-traded funds (ETFs), and sometimes alternative investments.

• Review Existing Investments: Upon inheriting the account, review the existing investment portfolio. The original owner's investment strategy may not align with your financial goals, risk tolerance, or time horizon.
• Rebalance or Reallocate: Consider rebalancing the portfolio or reallocating assets to better suit your needs. For instance, if you're an EDB stretching distributions over decades, you might opt for a more growth-oriented strategy. If you're subject to the 10-year rule and need funds sooner, a more conservative approach might be appropriate.
• Professional Guidance: Working with a financial advisor is highly recommended to help you assess your investment options, create a suitable strategy, and manage the account in line with the inherited IRA rules. Advisors can also help with tax planning for distributions.

Alternative Investments in Inherited IRAs

Some beneficiaries might consider alternative investments within their inherited IRA, such as precious metals. Companies like Augusta Precious Metals, American Hartford Gold, and Birch Gold Group specialize in facilitating the inclusion of physical gold, silver, platinum, or palladium in self-directed IRAs.

• Self-Directed IRA: To hold physical precious metals, the inherited IRA must be a self-directed IRA, which allows for a broader range of investment options beyond traditional stocks and bonds. Not all custodians offer self-directed IRAs.
• Diversification: For some, adding precious metals can be a strategy for diversification, acting as a hedge against inflation or market volatility.
• Custodial Requirements: Be aware of the specific rules and fees associated with holding physical precious metals in an IRA, including storage requirements with an approved depository.

While precious metals can be an option, they come with their own set of considerations and are not suitable for everyone. Always conduct thorough due diligence and consult with a financial advisor before making such an investment.

Common Mistakes to Avoid

Navigating inherited IRA rules is complex, and mistakes can be costly. Being aware of common pitfalls can help you avoid them.

Taking a Lump Sum Distribution (Without Planning)

While taking a lump sum might seem simple, it can trigger a substantial tax bill. If you inherit a traditional IRA, the entire distribution is taxed as ordinary income in the year you receive it. This can push you into a much higher tax bracket.

• Considerations: Only take a lump sum if you have an immediate, critical need for the funds and understand the tax implications, or if it's a Roth IRA and qualified for tax-free withdrawal. Otherwise, spreading distributions over the available period is usually more tax-efficient.

Missing the 10-Year or 5-Year Deadline

Failure to fully distribute the inherited IRA by the applicable 10-year or 5-year deadline is one of the most expensive mistakes. The 25% (or 10%) penalty on the undistributed amount can wipe out a significant portion of the inheritance.

• Solution: Set reminders, work with your financial advisor, and track the deadline diligently. Plan your distribution strategy well in advance.

Improperly Titling the Account

If you mistakenly roll an inherited IRA into your personal IRA when you are not a spouse, or if you don't title the inherited IRA correctly, you could inadvertently trigger a taxable distribution and penalties.

• Solution: Always clarify with the IRA custodian how the account should be titled and ensure it's set up as an "inherited IRA" or "beneficiary IRA" unless you are a spouse electing to treat it as your own.

Not Taking the Deceased's RMD for the Year of Death

If the original owner died after their RBD and had not yet taken their RMD for that year, the beneficiary is responsible for taking it by December 31st of the year of death. Missing this can lead to penalties.

• Solution: As soon as you are notified of the inheritance, determine if the deceased had taken their RMD for the year they passed away. If not, take it promptly.

Not Consulting a Professional

The rules for inherited IRAs are intricate and subject to change (as seen with the SECURE Act). Attempting to navigate them alone without professional guidance can lead to costly errors.

• Solution: Engage a qualified financial advisor and, if necessary, a tax professional or estate attorney. They can help you understand your specific situation, optimize your distribution strategy, and ensure compliance with all IRS regulations. This is particularly important for complex situations involving trusts or multiple beneficiaries.

Frequently Asked Questions

What are the main changes to inherited IRA rules under the SECURE Act?

The SECURE Act of 2019 eliminated the "stretch IRA" option for most non-spouse beneficiaries, replacing it with the 10-year rule. This means most non-spouse individual beneficiaries must now fully distribute the inherited IRA by the end of the tenth calendar year following the original owner's death, rather than stretching distributions over their lifetime. Certain "Eligible Designated Beneficiaries" (EDBs) are exempt from this rule.

Who qualifies as an Eligible Designated Beneficiary (EDB) for an inherited IRA?

As of 2026, EDBs include surviving spouses, minor children of the original account owner (until age 21), disabled individuals, chronically ill individuals, and individuals not more than 10 years younger than the original account owner. These beneficiaries can still stretch distributions over their life expectancy.

What happens if I don't take distributions from an inherited IRA within the 10-year rule?

If you are subject to the 10-year rule and fail to fully distribute the inherited IRA by December 31st of the tenth calendar year following the owner's death, the undistributed amount is subject to a 25% excise tax penalty. This penalty can be reduced to 10% if the failure is corrected promptly.

Can a surviving spouse roll an inherited IRA into their own IRA?

Yes, a surviving spouse has the unique option to roll over an inherited IRA into their own IRA. This allows them to treat the account as their own, delay RMDs until their own Required Beginning Date (age 73 as of 2026), and make future contributions. This is generally the most advantageous option for spouses.

Are inherited Roth IRA distributions taxable?

Qualified distributions from an inherited Roth IRA are tax-free. For distributions to be qualified, the Roth IRA must have been established and funded for at least five years before the first distribution. Even with the 10-year rule for non-spouse beneficiaries, the tax-free nature of these withdrawals makes them very beneficial.

What is the difference between the 5-year rule and the 10-year rule for inherited IRAs?

The 5-year rule applies to non-designated beneficiaries (like estates or non-qualifying trusts) if the original owner died before their Required Beginning Date. The entire IRA must be distributed by the end of the fifth year. The 10-year rule applies to most non-spouse individual beneficiaries (Designated Beneficiaries) and requires the IRA to be fully distributed by the end of the tenth year.

Do I have to take Required Minimum

Distributions (RMDs) from an inherited IRA under the 10-year rule?

Generally, no. For most non-spouse designated beneficiaries subject to the 10-year rule, there are no annual RMDs within the 10-year period. The only requirement is that the entire account balance must be distributed by the deadline. However, if the original owner died on or after their RBD, the beneficiary must take the RMD for the year of death.

Key Takeaways

• Beneficiary Type Matters: Your relationship to the deceased (spouse, EDB, DB, NDB) dictates the inherited IRA rules you must follow.
• SECURE Act Changed Rules: The 10-year rule now applies to most non-spouse beneficiaries, requiring full distribution by the tenth year after the owner's death.
• Spouses Have Flexibility: Surviving spouses can treat the IRA as their own or keep it as an inherited IRA, each with distinct advantages.
• Tax Implications are Crucial: Distributions from traditional inherited IRAs are taxable as ordinary income; inherited Roth IRA distributions are generally tax-free.
• Deadlines Are Non-Negotiable: Missing the 5-year or 10-year distribution deadline can result in a steep 25% excise tax penalty on undistributed funds.
• Professional Guidance is Essential: Due to the complexity, consult with a financial advisor and tax professional to navigate inherited IRA rules and optimize your strategy.
• Proper Account Titling: Always ensure the inherited IRA is titled correctly (e.g., "Deceased FBO Beneficiary") to avoid costly errors.

Conclusion

Inheriting an IRA can be a significant financial event, offering a valuable opportunity to enhance your financial security. However, the complex and ever-evolving inherited IRA rules, especially those introduced by the SECURE Act, demand careful attention and informed decision-making. Understanding your beneficiary status, the applicable distribution deadlines, and the tax implications is critical to avoid costly penalties and maximize the value of your inheritance.

Whether you're a surviving spouse with flexible options, a non-spouse individual navigating the 10-year rule, or dealing with a trust as a beneficiary, proactive planning is key. Don't hesitate to seek guidance from a qualified financial advisor and tax professional. They can help you set up the account correctly, devise a tax-efficient distribution strategy, and ensure you comply with all IRS regulations for your inherited IRA. By taking these steps, you can confidently manage your inherited assets and integrate them effectively into your overall financial plan.

Disclaimer: This article is for informational and educational purposes only and does not constitute financial, investment, or tax advice. Always consult a qualified financial advisor before making investment decisions.

Common Retirement Myths — Debunked

Misinformation about retirement planning is widespread and can cost you tens of thousands of dollars. Here are the most common myths — and the facts that correct them.

Myth: You can't contribute to an IRA after age 70½.

Fact: The SECURE Act eliminated the age limit for traditional IRA contributions. As long as you have earned income, you can contribute to a traditional or Roth IRA at any age. The annual contribution limit in 2026 is $7,000 ($8,000 if you're 50 or older).

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Myth: Rolling over a 401(k) to an IRA always results in taxes.

Fact: A direct rollover from a 401(k) to a traditional IRA is a non-taxable event — no taxes or penalties apply as long as funds move directly between custodians. A 60-day indirect rollover is also tax-free if completed within 60 days, but 20% is withheld upfront and must be replaced from personal funds.

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Myth: You can't contribute to an IRA if you have a 401(k) at work.

Fact: You can contribute to both a 401(k) and an IRA in the same year. However, if you or your spouse have a workplace retirement plan, your ability to deduct traditional IRA contributions phases out above certain income thresholds. Roth IRA contributions are not affected by workplace plan participation — only by income.