The theme this week on the Retirement Quick Tips Podcast is: Inherited IRAs

Today, I’m talking about Inherited Roth IRAs, and why the case for Roth IRAs just got stronger. Yesterday, I briefly touched on how moving more of your Traditional IRA assets into Roth can help reduce future taxes beneficiaries of those IRA assets will pay on the withdrawals. That’s because unlike inherited IRAs for traditional IRAs, heirs generally won’t pay taxes on assets withdrawn from an inherited Roth IRA, which is great news since the tax bite on a large inherited IRA of say $1,000,000 could be as much as 40% or more for those non-spouse beneficiaries! That’s $400,000 or more gone in taxes over 10 years from a $1,000,000 IRA that took decades to accumulate. 

If you’re as sick to your stomach as I am, then the case for Roth IRA assets after these 10-year rule changes went into effect is even more compelling. 

So if you’ve been considering a Roth Conversion or simply contributing more of your 401k dollars to the Roth account while you’re still working, think not just about the taxes this year that you’d miss out on by contributing to your Roth, or the taxes you’d pay on a conversion, but think long-term as well on the taxes that your heirs won’t pay on those Roth IRA withdrawals once they inherit the account. 

And considering that Roth IRA assets are most often the last accounts to be drawn down in retirement, you’ll want to ensure that as much of your assets are sheltered inside of a Roth to reduce the future tax bite on your heirs. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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