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What you should know about Roth accounts and retirement planning

Roth IRAs and Roth 401(k)s allow individuals to make tax-free withdrawals in retirement by saving after-tax dollars. Rather than getting a tax break for saving the money, as with a traditional retirement account, Roth accounts result in tax savings later down the line during retirement.

Having a Roth account can be especially beneficial for people who anticipate being in a higher tax bracket when they start making withdrawals than when they deposited the money into the account. In contrast, converting to a Roth may not be the right decision for people who expect to have a lower tax rate in the future.

Those who already have a traditional IRA can convert the funds into a Roth. In the year of the conversion, the individual must pay taxes on the full amount placed in the Roth. If necessary, the conversion can be done in smaller steps over the course of several years. One effective strategy is to convert just enough to reach the top of one’s current tax bracket.

Another advantage of Roth accounts is that withdrawals of earnings can be made with no taxes or penalties, as long as the person is over the age of 59½ and has had at least one Roth open for at least five years. Contributions can be withdrawn without taxes or penalties at any time.

In contrast to traditional IRAs, there is no minimum distribution requirement for Roth IRAs upon reaching the age of 70½. Account holders who do not need to withdraw from their Roth IRA can allow the money to grow in tax shelter until their death. Once the account passes to a non-spouse heir, that person is required to take minimum distributions. The taxes paid on a Roth conversion are not included in a person’s taxable estate.

The elder law attorneys at Hook Law Center assist Virginia families with will preparation, trust & estate administration, guardianships and conservatorships, long-term care planning, special needs planning, veterans benefits, and more. To learn more, visit or call 757-399-7506.

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