I recently inherited a about $25,000 ROTH IRA. By December 31st, 2034, this account must be zero due to the SECURE Act. Is ten years not long enough to fit everything into VO0 or fxaix? In the end, I want as much growth as I can because my current plan is to take all of the money out tax-free around the 8–10 year mark and use it as a down payment for a house. What do you think?
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Verify your tax laws; you probably need to take an RMD annually for a beneficiary IRA. This has been waived in recent years, but it will resume in 2025. VOO and fxaix might be split 50/50 for growth and downturn hedging. You don’t want to take the chance that 2033 will have a 20 percent loss like 2022 did. To offset the withdrawals for the following year, you may even invest a small amount in SPAXX, yielding 4+ percent, and leave the other two investments alone. Yes, ten years is a respectable length of time.
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There are no required minimum distributions (RMDs) for an inherited Roth IRA. RMDs apply only to traditional IRAs, and even then, only if the original owner had reached the RMD age before their passing.
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Under the SECURE Act, there are no annual RMDs for inherited Roth IRAs unless the beneficiary is an eligible designated beneficiary (EDB) who opts for the stretch provision instead of the 10-year rule.
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No RMDs because it’s a Roth. I believe he would have good reason to include some specific equities, such as MSFT. If he were investing in S&P 500 funds, I would suggest VGT.essentially performs the same functions as VOO, but with greater force in any direction.
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Ultimately, I’m aiming for as much growth as possible.
Aren’t we all! The challenge is that higher growth potential often comes with higher risk. It really depends on how much risk you’re willing to take.
That said, an S&P 500 index fund (like VOO or FXAIX) is a solid option for an 8-10 year horizon. You won’t see the massive gains you might get from perfectly timing a future NVDA or GME, but it’s also less prone to major drops. Any large market downturn that hits big companies would likely affect others too, and picking the standout performers in advance is nearly impossible.
For broader diversification, you might consider a Total Market Index fund (FSKAX with Fidelity or VTI/VTSAX with Vanguard). These funds still include the S&P 500 companies but also give you exposure to smaller companies, some of which could grow significantly over the next decade, potentially outperforming the S&P alone.
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You are fortunate that it’s a Roth IRA instead of a traditional IRA. I’d recommend leaving it untouched until December 2034, unless you need extra income to fully fund one of your retirement accounts. For instance, you could increase your retirement contributions and cover the gap with a distribution from the inherited Roth. Either of the two funds is a solid choice. Depending on your age and risk tolerance, you may also want to consider adding some individual stocks to the mix.