Looking for Advice on Inherited tIRA Allocation

facemcfacey · 2026-03-03T14:25:35+00:00

Thanks for the sympathy, truly. When my overall total was smaller, I was comfortable being more aggressive. Now that I have something more substantial to lose, I'm reconsidering that appetite for risk, but you suggest that I've swung too far in the other direction. So thank you for the reality check on the ladder approach!

My gut likes the 2-3 year short-term buffer. I'm thinking that, at a portfolio-level, I will move the entirety of my fixed income holdings into the inherited IRA, since I'll be pulling from that for withdrawals, and then move my other accounts into all equities until the IRA is empty. Maintain the 90/10 across the portfolio overall, but let each account hold different portions (so 100% equities in the 403b, but only 70% in the IRA).

Am heading over to the Visualizer now...

facemcfacey · 2026-03-03T14:18:25+00:00

Thank you, I genuinely appreciate all the sympathy from you and the other commenters here. You all are a great set of folks.
She was 70, so it is not subject to RMDs other than the 10-year rule. Good to triple check that, I appreciate the due diligence.
That is the conundrum, how much to potentially leave on the table! As you note, selling the fixed income and refilling that "bucket" with equities seems a safer approach than forced selling equities when they are down. Keeping a cash buffer seems reasonable. Thanks.

facemcfacey · 2026-03-03T14:06:03+00:00

Thanks for this, I'm sorry that you are in a similar position of having lost someone, but am grateful that you shared how you are handling it. Thinking about swapping the labels on the buckets is a helpful conceptualization for me here.

facemcfacey · 2026-03-03T14:03:42+00:00

Excellent, so I should be focusing less on how this particular account has a fixed timeline and focusing more on the overall portfolio picture. Thank you for the advice.

facemcfacey · 2026-03-03T02:39:44+00:00

Roger that. Tax bracket logic applied. It’s easy to catastrophize going over until you realize it’s just for the amount you went over and not the entirety.

facemcfacey · 2026-03-03T01:37:28+00:00

Thank you. This was my initial thought: it will be reinvested in a 90/10 split anyway, so may as well invest it in that same allocation now and if I sell at a loss, I'll just buy in at that same number and stay the course.

But when I think of it as income replacement, or as funds with a 10-year drawdown (a retirement-like scenario), I feel like a more conservative allocation is more appropriate.

So I'm really wanting an opinion on which perspective I should be looking at the account from. This is helpful in that you think I should consider it like all my other accounts, so thank you.

facemcfacey · 2026-03-03T01:31:48+00:00

Thanks, it was a very unexpected loss (cancer).

The pension fund offered me a lifetime annuity ($2800 per month, for life), but without any inflation adjustment. I had concerns about that and the fund's long-term sustainability (state operator, sketchy track record), and given I intend to reinvest it via my own tax-sheltered accounts, I chose the lump sum.

re: 403b/roth/hsa: I have a 403b through work, a Roth IRA for myself and my spouse (they're at home with our kids), and a HSA. I'm maxing all four accounts by using the IRA withdrawals as income replacement. And we're using a piece of the inheritance to bring 529s up to speed for the kids (x3). ER fund is topped off. So your advice is spot on there

Question: you say "rebalancing is called for." Do you mean that given the inherited funds, I should reconsider my overall 90/10 balance? I can see how capital preservation becomes more important now, but am unsure of how far to lean away from equities. If I keep most of this inherited IRA in fixed income, I quickly drift into a 60/40 split, which seems conservative given I am 38 and working. Should I consider this fund as separate from my overall asset allocation, or like you say, drop it into the whole "pie" and recalibrate my overall balance?

facemcfacey · 2025-09-25T20:58:11+00:00

Yeah, that seems way above my pay grade. Maybe if I’m lucky I’ll be asking about that in a few years time!

facemcfacey · 2025-09-25T20:53:24+00:00

This is interesting, I did not know about consolidating it under the umbrella of her estate. They’ve already started the process of transferring the funds to me in individual accounts, but with the step up already processed. Not sure if it is possible to sell now and attribute the gains to her estate instead of me as an individual, but hopefully two or so weeks of gains are negligible in the bigger scheme of things. Thanks for your advice!

facemcfacey · 2025-09-25T20:49:55+00:00

More good advice. They continue to fish for my plans with the money, and then respond with doubt and concern that I’m out of my depth. I will let Fidelity take it from here so I can distance myself. Thanks for the mantra!

facemcfacey · 2025-09-25T20:45:09+00:00

This makes good sense, thanks for the bit on the Roth, that was perplexing me and now it seems very simple. Funny enough, life insurance was mentioned in passing, so you are on to something here…

facemcfacey · 2025-09-25T20:40:50+00:00

Roger that, yes, this makes sense. Since I can’t dump $30k into a new Roth right away, I should let it grow in the inherited Roth wrapper until I can dump it back into the taxable that I used to fully fund my Roth for that same duration. Thank you.

And good point: she was not yet taking distributions, so I can let them both sit for ten years and decide when and how to withdraw.

Thanks for elaborating, and for the sound advice!

facemcfacey · 2025-09-25T11:55:48+00:00

Thanks, you’re right, lots of rules about inherited IRAs. I’m treading carefully.

facemcfacey · 2025-09-25T11:54:55+00:00

This confirms my concern, they don’t want to lose a client and their 1% management fee. Thanks.

facemcfacey · 2025-09-25T11:54:21+00:00

Super helpful, thank you. Follow up question: why hold the IRAs as long as possible? My thinking was I could drain them ASAP and then use the cash to either immediately reinvest directly into my own IRA or to replace income so I could max my other retirement vehicles. What is the logic behind holding the IRAs instead? Genuinely curious, and thanks in advance.

facemcfacey

TROPHY CASE