Host:What is a Roth IRA?

David John Marotta: A Roth IRA is like an IRA is like an IRA and that it grows, but you put the money in after you have paid taxes on it. It grows tax-free and then when you take the money out, you do not have to pay any taxes. Roth IRAs are great, when you are young and when you think, you are going to be in a higher tax bracket later on. They are even good, if all you expect is for bracket creep due to inflation to push you in the higher tax brackets.

So, for clients that qualify for a Roth IRA, we recommend funding the Roth IRA first and it will allow that money to grow tax-free. If you put $2000 into a Roth IRA for six years, when you are very, very young, that can multiply into multi millions of dollars, by the time you are in retirement and that multi millions of dollars will be tax-free. IRAs have required minimum distributions. Roth IRAs, because there is no required minimum distribution, can continue to grow and help fund the end of your retirement if you live to a 100 or beyond.

The other genius about Roth IRAs is that if you leave a Roth IRA as inheritance to someone who is very young, they then have to start required minimum distributions. But the required minimum distributions, they have to start at very low because they are young, they are based on their age.

So, if you leave a Roth IRA to a child that gives them a tax-free income stream their entire life and that is a very good estate planning use of Roth IRAs