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6 powerful benefits of the Roth IRA for all investors--Your heirs win, too

America is in a retirement crisis. Mary Jane, from the eastern suburbs of the Capital Region, has reached the age of 63...and is not ready for retirement. (Two pensions from her late husband and social security will get her close to her goal of generating 80 per cent of her current income in retirement.)

Retirement planning should include a Roth IRA
Photo by Sandra Mu

She's close to achieving her goal, but starting a Roth IRA can serve as her nest egg for retirement and should she not use her money, her children will benefit, too.

Usually, the simplest way to leave a tax-free bequest to heirs is to buy a large life insurance policy. However, with a Roth IRA, Mary Jane can take care of her needs and leave that bequest to her children.

  • The hands-off approach the IRS takes on Roth IRAs is beneficial for your heirs as well. Savers with ample accounts can leave their beneficiaries tax-free income that can be stretched over their lifetime.
  • The Roth IRA is funded with earned income, or dollars that have been in paychecks. It allows you to prepay taxes for future generations. As an estate planning tool, it's extraordinarily powerful. Grandchildren would receive tax-free income for the rest of their lives; all of the earnings for an extended period of time would be totally tax-free.
  • The trade-off is that you pay taxes now on the contribution. But if you anticipate leaving money to kids or grandkids, forgoing the tax break today can give your bequest a boost in the future.

Many people have heard the buzzwords "Roth IRA," but have not been educated on what it is, how it can benefit them, and how to get one set up. Become a smart saver and seek the sound information for your future...and your children's future.

Dave Balog teaches financial essentials to Capital Region families. View his Web site or call 952-1257 for a free consultation.

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