By now, many have heard about Roth IRAs and how Roths allow tax-free growth. Often, we fail to consider the huge opportunity to accumulate wealth by the combination of the lack of RMDs and the long-term compounding opportunities presented by a Roth. Roth IRAs can allow tax-free accumulations throughout the lifespan of a married couple and then ten years beyond that. The elimination of tax friction and the massive time advantage is key to building longer-term wealth.

Simple 2020 Roth conversion. Let’s start with a simple example of Marsha and Tom. Marsha is a retired teacher; Tom is retired from a chemical company and they have regular traditional rollover IRAs worth about $1,150,000. Marsha and Tom are both 72 and in decent health. For 2020, Tom and Marsha chose not to take their Required Minimum Distribution (RMD) since the CARES Act suspended the RMD requirement for 2020. They used the $45,000 they would have taken as an RMD to make a Roth conversion. 

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