IRA Problem: Income tax at death.

IRA Solution: Stretch, Charitable, Roth — any one of them is vastly superior to leaving an IRA subject to income tax at death.

Don Prehn and Steve Savant have put together an informative video that examines each alternative. It’s in two parts with the first segment (seven minutes) discussing the three options and the second segment (six minutes) covering the Roth IRA in more detail.

The main takeaway from the Roth evaluation is this: The tax cost to convert to a Roth is not a cost at all; it is an investment that produces a terrific return both for your clients and their heirs.

One thing I hope you didn’t miss near the end of the first video segment is Don’s discussion of the value of an Inherited Roth IRA. While there are plenty of reasons discussed in both segments as to why a Roth conversion is valuable, the gain to the heirs in after tax cash flow of more than $17 million from the Inherited Roth is extraordinary:
• $ 3,671,890 total after tax cash flow from the Inherited IRA.
• $ 20,967,997 total after tax cash flow from an Inherited Roth IRA.

That’s a 571% increase!…(read more)

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Blog #105: Stretch, Charitable, Roth (Three Smart IRA Strategies) is an article that talks about the three different strategies that individuals can use to make the most out of their Individual Retirement Accounts (IRAs). These three smart IRA strategies include the Stretch IRA, the Charitable IRA, and the Roth IRA.

The first strategy, the Stretch IRA, allows individuals to stretch out their IRA distributions over their lifetime, as well as the lifetime of their beneficiary. This is done by designating their IRA as a “stretch IRA” with their IRA custodian. This means that instead of receiving lump sum payments, the beneficiary will receive smaller payments over a longer period of time. This strategy can help reduce the tax burden on the beneficiary and allow for a larger overall payout.

The second strategy, the Charitable IRA, allows individuals to donate their IRA assets to a charity of their choosing. This can be done either during their lifetime or as part of their estate plan. By doing this, individuals can reduce the tax implications of their IRA distributions, as gifts to charities are typically tax deductible. Moreover, this strategy allows individuals to support a cause they care about even after they are gone.

The final strategy, the Roth IRA, allows individuals to contribute after-tax money to their IRA and have it grow tax-free. They can then withdraw the money tax-free in retirement. This is different from traditional IRAs, which allow individuals to contribute pre-tax dollars and pay taxes upon distribution. Converting a traditional IRA to a Roth IRA can be a good strategy for individuals who expect to be in a higher tax bracket in retirement.

Overall, these three IRA strategies can help individuals maximize their IRA distributions and minimize their tax implications. It is always advisable to speak with a financial advisor or tax professional before implementing any of these strategies, to ensure that they are suitable for one’s individual situation.