Roth IRA vs Mutual Funds

[FutureInternist]

My understanding of the new SECURE act is that an inherited Roth IRA must be distributed within 10 years and that the beneficiary does pay income tax on it.

With that in mind, would it make sense to use the $ 12,000 (for a couple) that would normally be used to invest in Roth IRA, to just buy non- retirement account mutual funds?

From what I know, inherited mutual funds get “stepped up” to their value on the day of death and then taxes are paid based on that, but is there a “must distribute by” date on these, because if not then I think that sounds like a better investment than Roth IRAs.

Thoughts?

Thanks

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[ThoracicGuy]

My understanding of the new SECURE act is that an inherited Roth IRA must be distributed within 10 years and that the beneficiary does pay income tax on it.

With that in mind, would it make sense to use the $ 12,000 (for a couple) that would normally be used to invest in Roth IRA, to just buy non- retirement account mutual funds?

From what I know, inherited mutual funds get “stepped up” to their value on the day of death and then taxes are paid based on that, but is there a “must distribute by” date on these, because if not then I think that sounds like a better investment than Roth IRAs.

Thoughts?

Thanks

You'll likely be using at least a portion of your Roth IRA to fund your own retirement. Personally, I would contribute to both an IRA and taxable accounts.

 

[TMP-SMX]

Beneficiary of a Roth IRA doesn't pay tax on it when inherited. Most of us need a brokerage as well and handing that to the next generation is nice as well given the step up in basis. You should have this as well as pre-tax accounts so you can control tax treatment during retirement.

 

[FutureInternist]

Beneficiary of a Roth IRA doesn't pay tax on it when inherited. Most of us need a brokerage as well and handing that to the next generation is nice as well given the step up in basis. You should have this as well as pre-tax accounts so you can control tax treatment during retirement.

I thought that the new law made it so beneficiaries DID have to pay taxes on all distributions and that they only have 10 years to withdraw all the money (as opposed to before when the kid could “stretch” the inherited IRA over their lifetime)

I am aiming for Roth IRA to be for kid only since I have plenty in the other accounts (but obviously if push come to shove the kid is on their own ).

I guess if one could only do Roth IRA or non- retirement mutual funds, which would be better?

 

[TMP-SMX]

Most beneficiaries must withdraw over 10 years (starting at age of majority). The caveat is the Roth contributions must have been in the account for 5 years for earnings to be tax free on withdrawal.

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