Cash out of a beneficiary account?

[Nicholas Grandstaff]

Hello all.

I’m looking for someone to talk me out of cashing out of a beneficiary account if I’m making a big mistake. What say you?

Here’s the deal: I currently have a beneficiary account left to me by my father. He was over 55 when he passed. In 2019 I took the stretch option, meaning, for the rest of my life I take a required minimum distribution (RMD) from this account. It’s seen as income, so I pay fed and state taxes on the money received. I’m thinking it’s best to cash out now, pay the taxes (I’m going to pay them anyway) and use this money to invest in real estate. Given the assets I’m looking at I will most likely be able to purchase two properties, possibly three. By law, 20% federal and 7.75% state (MD) will be withheld. Hopefully I’ll see some of that back at tax time. I’m not sure if the real amounts matter for this conversation, let’s just say I’m dealing with 100K before taxes. Also, due to it being a beneficiary account I’m not going to have to pay the 10% early withdrawal penalty.

What are the reasons you would tell me NOT to cash out this account and move it into real estate? What am I missing? Is there a better way to deal with this account?

As always, thank you for your time.

Nick