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But thats not the end of the story.
RMDs can still come into play when someone inherits your Roth IRA.
Whats a Roth IRA?
A Roth IRAis a retirement account you fund with money youve already paid taxes on.
Do Roth IRAs Have Required Minimum Distributions (RMDs)?
Roth IRAs and traditional IRAs are both investment vehicles for retirement.
Roth IRAs are investments made with after-tax dollars, and there is no immediate tax benefit.
Traditional IRAs are investments that are made with pre-tax dollars and these investments reduce your taxable income.
That means your savings cankeep growing tax-freefor as long as you want.
Want to leave it all untouched until you pass it on?
you’re able to.
Prefer to start withdrawals in your 70s or 80s?
What Happens When Someone Inherits Your Roth IRA?
Thats where RMDs come back into the picture.
While youre not required to take distributions from your Roth IRA during your lifetime,your heirsgenerally will be.
Usually, yes if the original Roth IRA was open for at least five years.
Qualified distributions are tax-free, even for beneficiaries.
Tax Implications of RMDs on Roth IRAs
The tax implications of RMDson Roth IRAs are clear.
Since you arent required to take a minimum distribution, your Roth IRA can grow tax-free.
Currently, the penalty is 25% of the amount that was supposed to be withdrawn.
If you correct the error within two years, the penalty drops to 10%.
If you dont need to withdraw from your Roth IRA even in retirement, that isnt an issue either.
Roth IRAs do not require an RMD, so you could grow the funds without any interruptions.
Your beneficiaries can withdraw funds without incurring income taxes, provided the account has met the five-year holding requirement.
This allows maximum growth potential for your inherited Roth IRA.
How Do Roth IRAs Compare to Traditional IRAs?
Understanding the key advantages make up your mind about thisinvestmentvehicle.
FAQs About Roth IRA Minimum Distributions
The information is accurate as of April 10, 2025.
Takeaway
Finding and working with a financial advisor is a great idea.
A financial advisor will help keep track of your finances and assist you in attaining your financial goals.
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