What Distribution Options Do I Have With My Inherited IRA?

By Sarah Brenner and Beverly DeVeny
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This week’s Slott Report Mailbag picked up on the “gold in IRAs” trend captured in this Beverly DeVeny article from last Tuesday and this Jeffrey Levine Q&A posted on Wednesday. We answer Bill’s questions on selling the gold from his IRA then we move into questions on the Roth IRA 5-year rule and distribution options for inherited IRAs. As always, we recommend that you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.


I have some gold US Eagles in an IRA account at a brokerage house. I would like to remove a gold coin from the IRA and replace it with the equivalent cash value based on the price of gold on the day of the exchange.

I have a few short questions:

Is this an allowable transaction? Can this transaction occur without having it considered a “premature distribution” or some other prohibited/taxable activity? I have not yet started to take the normal required distributions from the IRA.

If I were to do such a transaction, could I then sell the gold coin at a later date and pay the appropriate gain/loss taxes based on the original purchase price of the coin?

Thank you in advance for your help.


Removing a coin from your IRA is considered a distribution. The fair market value of the coin on the day of the distribution would be amount considered distributed to you. The distribution would likely be taxable and subject to the early distribution penalty if you are under age 59 ½ and no exception applies. If you sold the coin, you would not be permitted to roll over the cash proceeds. The rules require that when property is distributed from an IRA, the same property must be rolled over. You may not substitute cash even if it comes from the sale of the property.



I converted my traditional IRA to a Roth IRA in 2009 and paid taxes on that conversion. It is now 2015, and the Roth IRA is more than five years old. Over the past years, I have made no contribution to my Roth IRA. I need some money now, and would like to take money out of my Roth IRA to pay some big bills. Can I take a tax-free and penalty-free distribution from my Roth IRA? I am 49 years old.

The converted funds in your Roth IRA are available to you tax and penalty free. The converted funds are tax-free because you already paid the taxes in 2009 when you converted your traditional IRA to Roth IRA. There is no 10% early distribution penalty even though you are under age 59 ½ because it has been more than five years since you converted. Your converted funds will all be considered distributed from your Roth IRA first. Then your earnings, which you hopefully have, will be considered distributed next. Earnings are distributed tax and penalty free from a Roth IRA if a five-year period is satisfied and you are over age 59 ½, disabled, purchasing your first home or deceased and the distribution is to your beneficiary. Since you do not meet those criteria, any distribution of earnings to you would be taxable and subject to the 10% early distribution penalty unless an exception to that penalty applies.



I have recently inherited a traditional IRA with three other siblings from our father. He was 92 and was taking out RMDs (required minimum distributions). If we each open an inherited IRA account, is the five-year rule available or are there only two options – cash it out or use it as a stretch IRA and take RMDs?

Thank you,


The 5-year rule would not be available because your father died after his required beginning date (April 1 of the year following the year he attained age 70 ½). Each beneficiary can decide what to do with their share. You or your siblings could choose to cash out your shares of the IRA. If separate inherited IRA accounts are established by December 31 of the year following your father’s death, you could each take death distributions over your own single life expectancies from the inherited IRAs. You or your siblings may choose to take more than the RMD amount from the inherited IRAs at any time so you could empty the account in five years if that’s what you wanted to do.


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