Can You Roll an Inherited IRA into a Roth? The Complete Guide for Beneficiaries

So you’ve inherited an IRA and now you’re wondering if you can roll it into a Roth account to enjoy those sweet tax-free withdrawals in the future? Well I’ve got all the answers you need right here because this is a question that comes up a lot in my financial planning practice.

The Short Answer: It Depends on Your Relationship to the Original Owner

Getting right to the point: whether you can convert an inherited IRA to a Roth IRA depends on one important thing: how close you are to the person who left you the account.

• If you’re a spouse: Yes, you generally can (with some specific steps)
• If you’re NOT a spouse: Nope, you’re outta luck (but there are workarounds)

Spousal Beneficiaries: Your Special Privileges

If your spouse died and left you an IRA, you have choices that other beneficiaries don’t have. Congratulations, but not on the loss.

As a surviving spouse you can treat the inherited IRA as your own by

1. Designating yourself as the account owner
2. Rolling it over into your existing IRA
3. Contributing to it as if it were always yours

Once you own the account, you can change it to a Roth IRA without any problems. As with any other traditional IRA you own, the process is the same.

Timing Matters for Spousal Rollovers

Here’s something to think about though – if you’re under 59½ years old, you might want to wait before assuming ownership. Why? Because if you need to make withdrawals, you’ll avoid the 10% early withdrawal penalty if you keep it as an inherited IRA.

For example, let’s say you’re 55 and inherit your spouse’s $400,000 traditional IRA. You might keep it as an inherited account for a few years (taking penalty-free withdrawals if needed), then assume ownership once you hit 59½ and start doing Roth conversions then.

Non-Spousal Beneficiaries: Sorry, But There’s Bad News

Someone other than your spouse gave you an IRA (parent, sibling, friend, etc.), you must follow certain rules. I’m afraid that direct Roth conversions are no longer possible because of the IRS. You cannot convert an inherited IRA to a Roth IRA.

This is a hard rule with no exceptions – once the account is inherited by a non-spouse, conversion options disappear.

But don’t close this browser tab yet! There are still some strategies to consider.

Workarounds for Non-Spouse Beneficiaries

Just because you can’t do a direct conversion doesn’t mean you can’t get creative. Here are some alternatives:

1. Strategic Withdrawals + New Roth Contributions

Remember, non-spousal beneficiaries must empty the inherited IRA within 10 years (thanks to the SECURE Act). Here’s a strategy to consider:

1. Take strategic withdrawals from your inherited IRA
2. Use some of that money to fund your own personal Roth IRA (if you’re eligible)
3. Maximize your annual Roth contribution ($7,000 in 2025, or $8,000 if you’re 50+)

For instance, if you inherit a $200,000 traditional IRA, you might withdraw $20,000 annually. You could then use up to $7,000 of that to fund your own Roth IRA (assuming you qualify based on income).

This isn’t technically a conversion, but it does accomplish moving some money from taxable space to tax-free growth.

2. The 10-Year Rule Flexibility

While you must empty the account within 10 years, you don’t have to take equal distributions each year. This gives you some tax planning flexibility:

• Take larger distributions in years when your income is lower
• Take smaller distributions in high-income years
• Consider taking nothing in some years and more in others

What About Inherited Roth IRAs?

If you’ve inherited a Roth IRA, you’re already in tax-free territory! However, you still need to follow the distribution rules:

• Spouses can treat it as their own
• Non-spouses typically must empty it within 10 years

Even though the withdrawals are tax-free, you still must take them within the required timeframe to avoid penalties.

The SECURE Act Changed Everything

Before I go further, it’s important to understand that the SECURE Act (passed in 2019) dramatically changed the rules for inherited IRAs.

Previously, non-spousal beneficiaries could “stretch” distributions over their lifetime. Now, most non-spousal heirs must withdraw the entire inherited IRA within 10 years of the original owner’s death.

There are exceptions to this 10-year rule for:

• Minor children (until they reach majority)
• Disabled individuals
• Chronically ill individuals
• Beneficiaries not more than 10 years younger than the deceased

Everyone else must empty the account within a decade, regardless of tax consequences.

Planning Ahead: Roth Conversions Before Death

If you’re the original owner of a traditional IRA and want to leave a more tax-efficient legacy, consider doing Roth conversions during your lifetime. By converting to a Roth while you’re alive:

1. You pay the taxes now (potentially at lower rates)
2. Your heirs receive tax-free distributions
3. You remove uncertainty about future tax rates

This strategy works especially well if you’re in a lower tax bracket now than your beneficiaries will likely be in the future.

Common Questions About Inherited IRAs and Roth Conversions

Can I convert an inherited IRA distribution to a Roth?

Once you’ve taken a distribution from an inherited IRA, that money is no longer eligible for a direct conversion. However, you can use those funds to make a regular Roth IRA contribution if you qualify based on income and have earned income.

What happens if I miss the 10-year withdrawal deadline?

The IRS doesn’t mess around here. If you fail to withdraw the full balance within 10 years, you could face a penalty of 25% of the undistributed amount. This decreases to 10% if corrected within two years.

Are inherited Roth IRAs subject to RMDs?

Yes! Even though Roth IRAs typically have no RMDs for the original owner, beneficiaries of inherited Roth IRAs must still deplete the account within 10 years under current rules.

The Tax Implications You Need to Know

When converting any traditional IRA to a Roth (including an inherited one for spouses), you’ll owe income tax on the converted amount. This is often the biggest consideration.

For example, if you convert $100,000 from a traditional IRA to a Roth IRA, that $100,000 gets added to your taxable income for the year. If you’re already in the 24% tax bracket, this could push you into an even higher bracket!

That’s why many financial planners (myself included) recommend spreading conversions over several years to manage the tax hit.

Working With a Financial Advisor

Navigating inherited IRAs and potential Roth conversions can get complicated fast. This is one area where working with a financial advisor can really pay off.

A good advisor can:

• Model tax scenarios for different conversion strategies
• Help evaluate bracket management
• Create a withdrawal schedule that minimizes taxes
• Ensure you’re following all IRS rules

My Final Thoughts

The rules around inherited IRAs and Roth conversions aren’t just complex – they’re also subject to change as tax laws evolve. What works today might not work tomorrow.

If you’re a spouse who inherited an IRA, you’ve got the most flexibility – take advantage of it! But don’t rush into a conversion without understanding the tax impact.

For non-spousal beneficiaries, while direct conversion isn’t an option, strategic withdrawals combined with your own Roth contributions can still create tax advantages.

Remember, everyone’s situation is unique. Your age, income, other assets, and overall financial goals all play a role in determining the best approach for your inherited IRA.

What questions do you still have about inherited IRAs and Roth conversions? I’d love to hear from you in the comments!

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Disclaimer: This article is for informational purposes only and is not intended as tax, legal, or financial advice. Always consult with qualified professionals regarding your specific situation.