Roth IRA Minimum Distribution Requirements

Is there a Roth IRA minimum distribution requirement?

No.

Unlike a Traditional IRA, which requires you to begin taking annual minimum distributions at age 70 ½, you aren't required to withdraw a dime from your Roth IRA just because you've reached an arbitrary age limit.

No Required Minimum Distributions

If you have a Traditional IRA, your invested principal grows tax-free for most of your working life. At age 59 ½, you can begin withdrawing funds. But at age 70 ½, the IRS requires you withdraw funds.

Unfortunately, these required minimum distributions are not always in your best interest. The percentage of your Traditional IRA balance that you're required to withdraw steadily increases each year from age 70 ½ all the way to age 115.

But what if you don't need to withdraw funds from your IRA?

What if you have a steady income from a defined benefit pension and you'd rather save your IRA funds for an emergency? Isn't it better for you if those funds continue to grow tax-free until the day you need them?

Absolutely.

That's where a Roth IRA has a tremendous advantage over a Tradiitional IRA.

Since there isn't a Roth IRA miminum distribution requirement, you can choose to let your retirement savings grow tax free for years and years after you reach age 70 ½.

The Advantage of No Required Minimum Distributions

So why is the absence of a Roth IRA minimum distribution requirement such an advantage?

Well, there's several reasons, but here are just a few...

• Control over your retirement savings
• No worry of forced distributions in a down market
• Continued access to tax-free growth

These are a just a few reasons why the lack of a Roth IRA minimum distribution rule plays to your advantage. Let's review each one...

Control Over Your Money - The absence of a Roth IRA minimum distribution requirement leaves you in control of your own retirement savings. Why should a faceless government agency mandate the timing of your own IRA withdrawals?

With a Traditional IRA, the IRS does exactly that. With a Roth IRA, you make the decision concerning what time is best to make a withdrawal.

No Forced Distributions In A Bad Market - What if a forced IRA withdrawal puts you at a significant financial disadvantage?

For instance, let's say you're 72 years old, and you receive an above-average company pension. Because your day-to-day expenses are easily covered, you decide it's best to let your retirement savings continue to grow in the stock market for years to come.

With a Traditional IRA, you might be required to withdraw funds from the stock market right after it takes a 40% nosedive. And that's certainly not in your best interest!

Or, living in fear of having to take a forced distribution right after the market takes a nosedive, you might draw the conclusion that's more beneficial to put your retirement savings into a money market account prior to age 70 ½. That way forced distributions won't creep up on you when your investments are down. But in doing so, you put the purchasing power of your retirement savings at serious risk to the ill effects of inflation.

Neither scenario is desirable.

But with your Roth IRA, you can ride out market fluctuations, knowing you are in charge of the timing decisions behind any withdrawals from your account.

Which, of course, naturally leads us into the next advantage of a Roth...

Continue To Grow Your Money Tax-Free - Since you don't have to worry about a Roth IRA minimum distribution requirement, you can continue to grow your retirement savings tax-free for years and years after you reach age 70 ½.

With a Traditional IRA, you're forced to take distributions which trigger an income tax liability. After paying those income taxes, you have less money left over to reinvest. And reinvesting those dollars in a traditional brokerage or money market account makes them subject to taxes on interest, dividends, and capital gains.

All along the way, your money is taxed, and as the years go by, you end up with less money than if you were able to continue growing the same dollars tax-free in your IRA.

With a Roth IRA, not only do you continue to grow your retirement savings tax-free, but any future withdrawals are tax-free as well.

At this point, you might say...

So what? What's the advantage of tax-free growth after age 70 ½?

The advantage is more money when you need and want it.

Perhaps you want a larger nest egg in case you spend the end of your life in a nursing home. Perhaps the day will come when you need an experimental medical procedure not covered by private insurance or Medicare. Maybe an unforeseen home repair or family problem will arise. Or, maybe, you just want to leave as much as possible for your children and grandchildren when you die.

Whatever you have in mind, it's your money. And the longer you grow it tax-free, the better off you are.

Conclusion

The absence of a Roth IRA minimum distribution requirement is favorable to your retirement savings plan. Keep this in mind when weighing the benefits of a Roth IRA vs. Traditional IRA.

Why?

Because your Traditional IRA requires you to take minimum distributions at age 70 ½, whether you like it or not.

And once you take a distribution from your IRA, that's less money growing tax-free for your future benefit. And that means...

• Less money for an emergency
• Less money for long-term medical care, and
• Less money for your children and grandchildren to inherit

Keep that in mind when choosing where and how to invest your IRA contributions...