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I am getting an Inherited ROTH-IRA -BDA from my ex-spouse in a divorce, I am also taking on a lot of debt, and need to cash out the Inherited ROTH-IRA -BDA, and pay some of debt and have some reserve money.

What are my options?

  • 2
    Can you describe the types of debt, other assets, living situation, your age and perhaps some goals? – MrChrister Aug 27 '11 at 7:40
  • From getting my divorce, I have some major tax debt about 25K, this had to do with some not very responsible money things we did. Took out money from a 401k and did not withhold enough taxes and credit card issues. My trade for taking the debt was I get the house. So I am trying to figure out how to work my way out of it. I will also be paying spousal Support and Child support. I know it is going to take me a few years to get out of debt, and I am trying to get out of it and get back on track. – norman Aug 29 '11 at 5:37
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An inherited Roth has no tax due at withdrawal. This doesn't change in the case of an inherited Roth received through a spouse as a result of a QDRO. So no tax for you.

To be clear, for an inherited Roth, there's an RMD each year (even though one may be under 59-1/2, e.g. a 5 yr old beneficiary will have an RMD) but there is no penalty for taking more than the RMD or cashing the full value.

Is there more to your question? Why are you taking on debt?

  • From getting my divorce, I have some major tax debt about 25K, this had to do with some not very responsible money things we did. Took out money from a 401k and did not withhold enough taxes and credit card issues. My trade for taking the debt was I get the house. So I am trying to figure out how to work my way out of it. I will also be paying spousal Support and Child support. I know it is going to take me a few years to get out of debt, and I am trying to get out of it and get back on track. – norman Aug 29 '11 at 5:31
  • When you owe that kind of tax bill, the IRS will allow a 5 year payment plan. In your situation, my first advice is to conserve cash. Of course the cards, being high interest, I assume, should be a priority. You can edit your question to add the details you'd like to share. The more details offered, the better the answers will be. – JoeTaxpayer Aug 29 '11 at 12:20
  • I only have one credit card, and my plan is to settle with them, but I need money to do that. I also want to get current on my house payment. (so far just pay it late every month). So if I can cash out the Roth IRA, I can pay off my debt, some of the taxes and have some reverse. I am not 59 1/2 yet and need the money now. But is unclear if I have to pay a penalty to take out? – norman Sep 12 '11 at 4:58
  • I added to the body of my answer to clarify. – JoeTaxpayer Sep 12 '11 at 13:28

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