Roth IRA Strategies For Inheritance

Roth IRAs are a popular retirement planning tool.  But they can be used as a generational planning tool as well. Roth IRAs provide several important advantages that include, but are not limited to, tax-free growth and not being subject to required minimum distributions for the owner.

While required distributions are required for Inherited Roth IRAs, the benefit of tax-free growth remains intact, even as the account transfers to children or grandchildren. The benefit of this is explained below.

Example

Jane has $250,000 in Roth IRAs and is 90 years old. She passes away, and the Roth IRA is inherited by her 30-year old grandson, Adam. As the grandson, Adam will have to take required minimum distributions, while the account will grow tax-free if the account is transitioned properly.

• Adam, Age 30: He inherits the $250,000 Roth IRA. He has to start taking required minimum distributions but the account will continue to grow tax-free.*

• Adam, lifetime income: If he chose “The single life expectancy rule”, the Roth IRA would pay out an estimated $2,613,205 in tax-free distributions over the course of his lifetime assuming a 7% rate of return, living until 83, and assuming only withdrawals of the required minimum.*

Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified investment, tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) or strategies may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss. You should consider the investment objectives, risks, charges and expenses of any investment carefully before investing.

“Inherited IRA RMD Calculator.” Voya Financial, 2018, www.voya.com/tool/inherited-ira-rmd-calculator.

Cicchinelli, Joe. “What You Need to Know About Inherited Roth IRAs.” What You Need to Know About Inherited Roth IRAs | Ed Slott and Company, LLC, 29 Aug. 2012, www.irahelp.com/slottreport/what-you-need-know-about-inherited-roth-iras.

Roth Conversions/Retirement Planning for Life Events. 2010, www.irs.gov/pub/irs-tege/forum10_roth_conversions.pdf.