My father passed a few years ago and left me two beneficiary IRAs. I take my minimum distributions from them once a year ($1000-2000 distributions).

I'm in my late 20s and want to invest in index funds soon. Does it make sense to take some money from one of these IRAs and invest in index funds or should I just leave them alone and invest some other funds?

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    Why don't you just change the IRA investment options to be the index fund(s) you want to invest in? If your IRA is with say Vanguard, you can have the money invested in just about any of Vanguard's fund offerings. And if the current IRA custodian doesn't allow this, you can switch :-) – jamesqf May 21 '19 at 3:52
  • I did not know this was even an option. I'll look into that. Thank you. – lampposteffect May 21 '19 at 3:56
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    @jamesqf That's an answer, not a comment! – Dilip Sarwate May 21 '19 at 16:20
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    @Dilip Sarwate: No, it is not an answer. An answer would be something along the lines of "No, you shouldn't take out more than the MRD because you'd lose a lot of it to taxes". It is a comment pointing out that the OP is asking the wrong question. – jamesqf May 21 '19 at 17:35

For the money in the beneficiary IRA, you should be able to pick from a group of Investments. This can include stock funds, bond funds, and even individual stocks. Those funds can be mutual funds or Exchange traded funds. It is likely among those lists of options some will be index funds, which are great because of their low costs.

If you have earned income from a job, you can use the minimum distributions that you are required to withdraw from the beneficiary IRA to increase the amount of money you are contributing to your IRA or 401(k). It won't let you exceed the limits set by the IRS, but if you aren't currently hitting those maximums, this required distribution can get you closer. Those additional funds can of course be invested in any of a large number of funds or other investments.

If your beneficiary IRA doesn't give you a lot of investment choices, you should look into rolling it over to a investment company that has a lot of investment choices.

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  • +1. My wife's IRA had been with a local bank and was earning some pathetic rate with no real options to do any better (of course, no rate is guaranteed unless in CDs, for example, which this one was). I finally convinced her to roll over to one at Vanguard. – topshot May 21 '19 at 12:48

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