4. Avoid having to take Required Minimum Distributions by switching to a Roth
Another benefit of a Roth IRA is that you won’t have to take Required Minimum Distributions (RMDs) like you would with a traditional IRA. With a traditional IRA, when you reach age 70½, you are required to withdraw a certain percentage of your IRA each year (based on your life expectancy). This happens whether or not you are still working, and whether or not you actually need the money. This will also increase your tax liability, as the traditional IRA will require you to pay taxes on your RMD when making a withdrawal. With a Roth, you can keep the money in your account as long as you want without having to take an RMD. And if you never end up using the money in your Roth IRA, you can pass it on to the next generation, something that is simply not possible with a traditional IRA. Employing these strategies can save you a great deal of money as you make the transition from your accumulation phase to your retirement phase.
