Inherited IRA

Transfer your inherited retirement account to an Inherited IRA to enjoy tax-deferred growth and no early withdrawal penalty.

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What is an Inherited IRA?

An Inherited IRA, or a Beneficiary IRA, is an account that is opened when someone inherits an IRA or employee-sponsored retirement plan after the death of the original owner. As a beneficiary, you can’t make additional contributions, but with an Inherited IRA the funds can remain tax-deferred, and you can generally withdraw money right away without a penalty. Inherited IRAs are typically opened for non-spouse beneficiaries, as spouses can transfer inherited assets directly into their own personal retirement accounts (although spouses can open an inherited IRA as well if they choose).

The rules for if/when you must begin taking Required Minimum Distributions and/or distribute all the account assets depend on your beneficiary classification:

  • Eligible Designated Beneficiary (spouse or minor child of the original account holder, or an individual that is disabled, chronically ill or no less than 10 years younger than the original account holder)
  • Designated Beneficiary (most other individuals)
  • Non-Designated Beneficiary (trusts and organizations)

There are additional nuances based on your exact relationship to the deceased, when they died, and their age at the time of their death. For more information, please read our Inherited IRA withdrawal rules page or consult your tax advisor.

Ready to get started? Read on for more account details and what you need to know before opening an Inherited IRA. 

Advantages of an Inherited IRA

  • Tax-deferred growth

    If you open an Inherited IRA instead of taking a lump-sum distribution, you can continue to take advantage of potential growth in a tax-advantaged account.

  • Withdrawals on a set schedule

    Periodic distributions can be set up to reoccur automatically, including Required Minimum Distributions (RMDs) if you are required to take them.

  • Spreading out your IRA distributions

    It may be possible to take smaller distributions over time, which can help you preserve assets longer and spread out tax liability.

Fees and commissions

Open an account with a $0 minimum deposit plus get $0 online listed equity trade commissions3, regardless of your account balance or how often you trade.

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This tax information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends that you consult with a qualified tax advisor, CPA, financial planner, or investment manager. Depending on the type of account you have, there are different rules for withdrawals, penalties, and distributions.  Please understand these before opening your account.

Benefits of an Inherited IRA with Schwab

  • Retirement planning tools and resources

    Schwab offers planning resources, calculators and retirement income strategies, to help you plan for the future.

  • Investing insights

    Stay informed with the latest market commentary, insights, and investing ideas from Schwab experts. 

  • Get support 24/7 + convenience of 300+ branches

    Call our financial professionals anytime. Plus get local support at a branch near you.

Common questions

Have questions about our Inherited IRA? Here are responses to some of the most common questions we hear. If you have a specific question that's not answered here, please call us at 866-855-5635.

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