Melinda Chase

Brandon, Florida 33511

Melinda has a wealth of experience in financial services and family legacy planning, and she is dedicated to helping federal and postal employees retire comfortably with as much tax-free income as possible. The few years she spent in funeral planning shaped her outlook on the importance of looking at both the present and the future in order to create the ideal retirement lifestyle for her clients.  

Melinda excels at guiding clients through the process of optimizing their federal benefits and pension annuities by creating a monthly income plan guaranteed for life that reflects their goals and wishes. She has a unique ability to make complex financial concepts easy to understand, and she is committed to helping her clients achieve their retirement goals.

Melinda’s financial career began 20 years ago at The Royal Bank of Scotland, where she helped small business owners save money on credit card processing fees. She later worked at a funeral home in Florida, where she learned the importance of pre-planning and having the right type of life insurance in place to protect loved ones during difficult times. 

In 2011, she started helping federal and postal workers navigate and understand their federal benefits. She quickly began to see how much money is wasted by people who do not fully understand their benefit plans and retirement system, and she is passionate about helping those who are willing to listen and take control of their financial futures. 

Creating a secure retirement plan with guaranteed lifetime income that adjusts for inflation is an important step towards a happy and stress-free retirement. It ensures that your financial needs will be met and allows you to enjoy the retirement lifestyle you want.

Inherited IRA Tax Secrets Every Federal Employee Must Know!

Inherited IRA Tax Rules: What Federal Employees Must Know About Retirement

If you’re a federal or postal employee and you’ve recently come into an inherited IRA, you’re not alone in wondering what comes next. An inherited IRA can be a powerful financial asset, but it also comes with IRS regulations, required distributions, and important tax consequences. Understanding IRA rules and planning carefully can help you protect your future and make the most of your retirement.

What Is an Inherited IRA Account?

An inherited IRA account—also known as a beneficiary IRA—is a retirement account that you receive after the death of the original account owner. The person who passed the account to you is often referred to as the deceased account holder or the original account owner.

These individual retirement arrangements are designed to help people save for retirement, and when passed down, the inheritor has specific responsibilities. This could be a spouse, child, or other eligible beneficiaries.

Types of Inherited IRAs and Their Differences

There are different types of IRAs you might inherit:

  • Traditional IRA: The funds were not taxed during the IRA owner’s lifetime. As the beneficiary, you’ll pay taxes on the taxable distributions you take.
  • Roth IRA: The original owner paid taxes on the contributions, so distributions are typically tax-free for the IRA beneficiaries, assuming certain conditions are met.

The kind of IRA you inherit will determine your tax treatment and how you can take distributions from the inherited account.

Who Qualifies as an IRA Beneficiary?

The beneficiary is the person or entity named to receive the IRA after the death of the account holder. IRA beneficiaries may include:

  • A spouse or child
  • Multiple beneficiaries (divided portions)
  • A trust
  • An estate (if no individual was named)

Depending on whether you’re a spouse beneficiary, non-spouse beneficiary, or part of a certain trust, your options and requirements will differ.

Spousal Beneficiaries Have More Flexibility

If you’re a spousal beneficiary, the IRS gives you more options:

  • Treat the IRA as your own, merging it with your existing retirement accounts.
  • Roll it into a new IRA in your name.
  • Take distributions under inherited IRA rules.

These options make it easier for a surviving spouse to incorporate the funds into their own retirement plans without triggering early withdrawal penalties.

Non-Spouse and Certain Beneficiaries: What Are the Rules?

If you’re not a spouse, you must generally follow the 10-year rule established by the SECURE Act. That means you must withdraw the entire inherited IRA within ten years of the original account owner’s death.

There are exceptions for eligible beneficiaries such as:

  • Minor children of the deceased (until they reach adulthood)
  • Disabled or chronically ill individuals
  • Individuals less than 10 years younger than the deceased

Understanding Required Minimum Distributions (RMDs)

RMDs are mandatory withdrawals you must take from an IRA. For inherited IRAs, your RMDs depend on your classification as a beneficiary and the type of IRA.

  • RMD age for most inherited accounts is tied to the 10-year rule.
  • If you’re an eligible beneficiary, you may be able to take RMDs based on your life expectancy.
  • Withdrawals of contributions from a Roth IRA are not taxable, but earnings may be if the account is less than five years old.

Tax Implications: What to Expect

  • Traditional IRAs: Distributions are subject to income tax.
  • Roth IRAs: Qualified distributions are tax-free, but rules must be followed.
  • If you’re dealing with a large inherited IRA, be mindful of how much you’re withdrawing each year—it could increase your tax return or Medicare premiums.

Inherited IRAs are subject to IRS rules and IRA distribution rules, which can be confusing. That’s why estate planning and talking to a financial advisor is always a smart move.

Inherited IRA and Federal Retirement: How They Work Together

Federal employees often have the Thrift Savings Plan (TSP) as part of their retirement. If you inherit an IRA, you now have multiple retirement accounts to manage.

Here’s how an inherited IRA interacts with your federal benefits:

  • TSP funds have different withdrawal rules than IRAs.
  • Taking large distributions from an inherited IRA may impact your retirement income planning.
  • Coordinating your IRA contributions, TSP, and FERS pension can reduce unnecessary taxes.

Distribution Options: How to Take Your Money Wisely

Your distribution options vary depending on whether you’re a spouse, non-spouse, or part of a trust.

Options include:

  • Lump sum withdrawals (may cause high taxes)
  • Annual RMDs over 10 years
  • Delayed withdrawal until the 10th year (only for certain beneficiaries)

If you inherit a Roth IRA, delaying distributions may allow tax-free growth. For traditional IRAs, spreading out distributions can prevent pushing you into a higher tax bracket.

Avoid These Common Mistakes with Inherited IRAs

  1. Missing RMD deadlines – Penalties for not taking RMDs can be up to 25% of the required amount.
  2. Not understanding the 10-year rule – You must plan how and when to withdraw the full balance.
  3. Treating the account like a regular IRA – Inherited IRAs cannot accept new contributions and must be handled separately.

The Role of Estate Planning and Trusts

An inherited IRA may be passed through a trust, which adds complexity. If the trust is not a qualified see-through trust, it may limit distribution flexibility and increase taxes.

Estate taxes may also apply in large estates. A strong estate planning strategy ensures your IRA assets are passed efficiently to your heirs or certain beneficiaries.

How The Benefit Coordinators Can Help

At The Benefit Coordinators, we specialize in working with federal and postal employees just like you. If you’ve inherited an IRA or other retirement assets, we can help you understand your distribution options, minimize taxes, and ensure your retirement plan stays on track.

We’ll help you answer questions like:

  • Should I treat the inherited IRA as my own?
  • How will this affect my FERS or CSRS pension?
  • What’s the smartest way to take distributions?
  • How do I coordinate this with my TSP or annuity?

Your Next Steps: Talk to a Professional

Don’t leave your inherited IRA to chance. With IRS regulations constantly evolving, it’s essential to understand how your inherited account fits into your overall retirement plan.

Let The Benefit Coordinators help you:

  • Protect your inherited assets
  • Reduce tax liabilities
  • Align with your long-term retirement goals

Schedule a free consultation today and get peace of mind knowing your financial future—and your inheritance—are in good hands.

Your Next Steps

Ready to make smart decisions about your inherited IRA? Contact The Benefit Coordinators to schedule a free consultation and get expert guidance tailored for federal and postal employees.