Your heirs benefit
The hands-off approach the IRS takes on Roth IRAs is beneficial for your heirs, as well. Savers with ample accounts can leave their beneficiaries tax-free income that can be stretched over their lifetime.
"It allows you to prepay taxes for future generations," says Certified Financial Planner professional Frank Armstrong, principal of Investor Solutions in Miami. "As an estate planning tool, it's extraordinarily powerful. Grandchildren would receive tax-free income for the rest of their lives; all of the earnings for an extended period of time would be totally tax-free.
"The trade-off is that you pay taxes now on the contribution," he says. But if you anticipate leaving money to kids or grandkids, forgoing the tax break today can give your bequest a boost in the future.