Traditional and Roth IRAs: Beneficiary Considerations

If you are considering taking out an IRA, you will need to decide whether to take out a traditional or Roth IRA. Both retirement savings vehicles have advantages and you can make the most out of your savings by using them. Before you decide which of the two to use, you will want to consider the long-term gains and how they will affect your beneficiaries.

The Traditional IRA

The traditional IRA is the most basic form of retirement savings fund and has many practical applications. It is usually tax-deductible and many companies support these kinds of IRAs. However, if you are considering the benefits for your beneficiaries, then the traditional IRA is not the best type of IRA for you. They are subject to taxation rules that require you withdraw a minimum amount each year once you are over the age of 70. This will reduce the amount left for your heirs. In addition, the value of the IRA is included in your estate and could be taxable.

The Roth IRA

Unlike the traditional, the Roth IRA is not subject to any type of taxation laws requiring you to take out a certain amount of money. Roth IRAs are also not subject to income taxation, which can benefit both your and your heirs.

blog comments powered by Disqus