Most people will tell you to choose a Traditional vs. Roth IRA based on what your expected tax rate will be now vs. when you retire, but there are other reasons to go with a Roth IRA:
1) There are no required minimum distributions from a Roth IRA.
You must withdraw funds from a 401(k) and Traditional IRA by age 70 1/2.
You do not have to withdraw funds from your Roth IRA. Ever.
If you are able to live off of the distributions from your 401(k) and Traditional IRA (and SEP and Simple IRA) savings, your Roth IRA account will continue to grow tax free for the rest of your life.
2) You can pass on the Roth IRA to your spouse and children.
The beneficiaries of your Roth IRA will be able to either:
- Cash out the account without penalty or income tax or
- Roll over the Roth IRA funds into their own Roth IRA
Having raised financially smart children this means, they will get a big boost to their Roth IRA retirement accounts. Why? Because typically there is a $5,500 limit to the amount of money you can invest in these accounts.
Therefore,
Use the Roth IRA funds during retirement years if you have to, but you can think of this account as an ideal inheritance for your children.
Read more: https://www.rothira.com/blog/how-to-use-a-roth-ira-to-avoid-paying-estate-taxes
All the Reasons to Have a Roth IRA
- You do not pay taxes on the investment earnings in a Roth IRA.
- You can withdraw your contributions (not earnings) before the age of 59 1/2.
- There is no required minimum distribution at at 70 1/2.
- Roth IRAs can be passed on to your spouse and/or children tax and penalty free.
- You can use up to $10,000 of the earnings tax and penalty free for first time home-buyer expenses.
For a full description of the benefits of Roth IRA’s visit: https://www.rothira.com/traditional-ira-vs-roth-ira.
