ira held by c schwab

Submitted by b s on Fri, 2020-03-06 04:18

my new inherited ira account is held by Charles Schwab and there is bank account with it . why is money put in the bk account.? is it the earnings from the ira companies put in the bank account. Can i use the money if i can use at all.? thanks ,



Submitted by Alan - IRA critic on Fri, 2020-03-06 04:51

  • The account showing as “cash and cash investments” is the sweep account at Schwab. That means all dividends and deposit you made go into this account, as well as the proceeds from anything you sell. You must have enough in this account to cover any purchases you make. This account pays almost no interest at all, but is FDIC insured through Schwab Bank. What you should do is once your balance in that account exceeds 1000, and you are not about to make a different purchase, you should purchase a Money market mutual fund like Schwab Value Advantage, which pays a competitive yield. But to get the funds back into the bank account you must sell Value Advantage for the sale to go back into the cash bank account.
  • Warning: Since this is an inherited IRA, you cannot do any rollovers. Any distribution you take from this account will be subject to taxation, but no penalty. You probably have annual RMDs starting in the year following the former owner’s death, and Schwab can help you calculating the RMDs if you need to. Note that you also cannot make any contributions to this inherited IRA. You CAN take more out than the RMD if you wish, but will be taxed on all distributions you take out of the inherited IRA. Any investment changes you make within the account are not subject to taxes or reporting.

 

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