John, good to see you. This video is for anyone who is inheriting a Roth IRA, we're going to break down exactly what you need to know. A Roth IRA allows you to save for retirement with after-tax dollars. That means you pay taxes on your contributions now, but your withdrawals are tax-free in retirement. So John, what are the benefits of inheriting a Roth IRA?

Well, the benefits of this video is Christmas in October Aaron, the benefits of a Roth IRA are tax-free, tax-free, tax tax-free. You are going to inherit an account. Let's just say hypothetically $500,000, you're going to inherit it, tax-free day one. Now if you get proper advice, and you let that money grow, all the growth on that can also come out tax-free, and we'll talk about that in a little bit.

And the one big thing that we need to make sure everybody understands is this 10-year rule, and it all comes down to what kind of beneficiary you are. Can you just break that down for me real quick?

Yeah, so since you mentioned the 10-year rule, this is really for non-spouse beneficiaries and certain trusts and trusts is a very, that comes with a lot of convoluted areas. So some trusts could trigger a five-year period, but for this video, let's just say your non-spouse beneficiary and they left the IRA directly to you. In most cases, you have 10 years to empty out that account. So depending on distributions, if, if you're in an IRA, and your person who you inherited the account from was taking out R&Ds. You’re gonna have to take a yearly R&D. But guess what, IRAs aren't subject to R&Ds, so you're gonna have 10 years, and at the end of the 10th year, this account balance has to show zero so you have to take a distribution of all the funds by the end of the 10 years.

We've talked before about inheriting a regular IRA and how that 10-year rule is a real burden. So I want you to explain if this, if I'm not paying taxes on those distributions, and this isn't affecting my taxable income, what's the big deal with the 10-year rule?

Well, the big deal is the fact of the matter that you get 10 years of tax-free growth. So again, you inherit $500,000. You make the proper decision, and you let that money grow. And let's just say the money grew to 750,000 or a million dollars at the end of the 10th year, you're going to have to take distribution of that entire account and you're going to pay zero balance on it. So you got all that growth over 10 years, tax-free.

Okay, so now let's walk through some tips for anybody who is inheriting a Roth IRA. And your first tip, you say you need to understand what kind of beneficiary you are.

Yes, you have to understand whether the IRA was left specifically to you, or the trust. Again, this video is for non-spouse beneficiaries. So, in most cases, the best way, generally speaking, is to list living human beings, your children, as the beneficiaries of an IRA or a Roth IRA.

And second, consider your tax situation.

Yes, when you inherited an IRA, those death taxes that were never paid on that IRA money, we're not talking to state taxes, death taxes, the taxes, and the IRA are now passed on to you. And so let's say you have to take out $100,000 distributions from an IRA that you inherited, well, that $100,000 is going to be added onto your income. The Roth IRA does not do that. So what people want to do, and this is that old marshmallow example, right? You put a marshmallow down you don't touch it. You get two marshmallows. People want to grab that marshmallow and people are going to be tempted to say, well, I don't want to pay taxes this year, and they're going to pull that money out. Don't do it right. Let this money grow tax-free because compounding tax-free growth is the most important and most powerful money you're going to have.

Right. Third, of course, invest the money wisely.

Yes. To make money you’re going to have to invest it. Invest the money that you come up with in a sound investment plan that you can stay the course for 10 years, and hopefully you you inherit this money at the beginning of a bull market.

Good luck, right? And then last, of course, get professional help because this really can get quite complicated.

Yes. First of all, if you're inheriting multiple accounts, nonqualified IRA, Roth IRA, you have to know the best way to take that money out, the best way in tax efficiency and growth efficiency to stretch that dollar out as far as possible because while we must pay the IRS, we don't want to tip the IRS. So getting that professional help is huge. The other thing is a lot of people we mentioned the 10-year rule, but there is a five-year rule with Roth IRAs that the account has to be open five years before you can start taking out any penalty-free distributions. That still applies to designated beneficiaries or to beneficiaries of the Roth IRA. So a lot of complexities, a lot of laws. So, you know, don't go out this alone.

Yeah, a lot to sort through John, if somebody is going to be bequeathing or inheriting a Roth IRA or just a regular IRA, what's the best way to reach you with questions?

Well, first, we always tell people to visit our website, www.gosecurus.com. We have plenty of resources and plenty of videos on Roth IRAs in the past. And while you’re on the website, you can visit our Contact Us tab and you can click on the link there where you can schedule a 15-minute phone call where we’ll answer any general questions or you can schedule a complimentary consultation or clarity vision consultation or if you'd like to do things the old fashioned way gives us a call at the office 858-935-6210 and we’ll get you on the calendar.

John, thank you very much.

Thank you, Erin.