also would CD's be a good investment ???
2007-09-12 02:44:03 · 5 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
What type of IRA is it? Roth, Traditional, Simple, etc.?
If you roll it into your IRA, then no, you shouldn't have to pay taxes on it.
If you're getting it as cash, then you might have to pay. If it were coming from Life Insurance, then you definately wouldn't. Talk to a tax lawyer. The $600 you'd pay them could save you a lot of money in taxes.
I think that CD's are a lousy investment. Real Estate Investment is such a better vehicle. Take that 40k and buy 2 foreclosed homes, get some investment education, hell even a REIT will almost assuradly give a better rate of return than a CD. Even dropping that 40k into your own mortgage will save you a lot of interest.
CDs don't always beat out inflations rates, so you'd have less value coming out of it then you had coming in...
2007-09-12 07:24:00 · answer #1 · answered by saberhilt 4 · 0⤊ 0⤋
I assume this is a traditional IRA.
First, you need to determine if you are the beneficiary of the IRA, or if your father's estate is the beneficiary and you are receiving the IRA money from the estate.
If you are the beneficiary and inherited this account in 2007, you are in luck. You can now rollover the IRA into your own account and defer taxes on the amount rolled over. Any amount not rolled over is going to be taxable income to you, added to all your other income and taxed as ordinary income.
By rolling over the IRA, you defer taxes until you receive the money as a distribution. You can choose the type of investment that you want, including CDs, stocks, bonds, mutual funds etc. Any of the financial services firms like Fidelity, Vanguard, and others, will be more than happy to explain your options.
If you choose to take all or part of this IRA as a distribution, then you could re-invest the money into CDs or other investments. But you would not be given the tax-deferral that you are eligible for by rolling the IRA over into your own IRA.
Ask for a consultation with a financial advisor from one of the big firms like Fidelity or Vanguard and they can answer any more questions you have about investing your inheritance.
Now, if the estate was actually the beneficiary, then this was handled in other answer(s). You pay income tax on the money you receive, and cannot roll it over into your own IRA.
2007-09-12 07:41:24 · answer #2 · answered by ninasgramma 7 · 1⤊ 0⤋
Assuming that it is from a deductible traditional IRA that he had, YES, you will have to pay taxes on it if you cash it out. They will probably withhold 20% for federal taxes on it but it still needs to be reported on your return. You will get credit for the withholding on page 2 of the return.
CDs can be a good investment. They are safe and conservative. I have a little bit of my money in CDs but certainly not all of it.
2007-09-12 02:51:10 · answer #3 · answered by Wayne Z 7 · 1⤊ 1⤋
If you roll it over few times ot may be ok and as long you use your investment to grow within the tax defer account it can be very beneficial to you such as:
IRA roll to Roth IRA Roll to Self dirct IRA.
These are just mechanism and knowledge how to drive you own wealth. Learn it, know it and how you use it it is up to you. Everybody entitle to open IRA in US as long you are US citixen and green card holder, why is not use to their advantage is question that never be answer!
What ever you do don't break the law is not worth it.
Invest in your knowledge and use it and help yourself and others too if you would.
2007-09-12 08:23:57 · answer #4 · answered by L L 3 · 0⤊ 1⤋
If the IRA is liquidated by the estate, the estate will pay any taxes due. If it is transferred to you directly there will be no tax due upon the transfer to you however when you withdraw funds from it that will be taxed as ordinary income to you since no tax was paid on the money going in.
2007-09-12 02:52:48 · answer #5 · answered by Bostonian In MO 7 · 1⤊ 0⤋