These big inherited IRA mistakes can shrink your windfall

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.

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.

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