Concerns over changes that may require more individuals with an IRA to begin withdrawing their money have many who are looking into IRA options considering a Roth IRA rather than a traditional IRA for retirement. Understandably, many individuals have turned to these Individual Retirement Accounts when it comes to planning for their future, but recent events have led to some individuals having to take money out of their retirement account.
As reported on CNNMoney.com certain investors who had difficulty in their retirement account from the recession and other economic factors were able to forgo the required minimum distribution which must be taken from traditional IRA accounts. Simply put, individuals who have reached the age of 70 1/2 are required to begin taking money from their IRA, but due to losses that had been sustained, these requirements were previously suspended for a set amount of time.
In some cases, individuals who are retired and taking money from their IRA account may suffer some loss as these required minimum distributions, or RDM withdrawals, are set to resume and will obviously give IRA holders less money on which to profit. When RDMs were suspended, individuals who had IRAs were able to leave money in their account and see profits as the market began to grow again, but since this suspension has been lifted, funds must be taken from traditional IRA accounts as a result.
However, some individuals are considering Roth IRA accounts to plan for their retirement as these types of IRAs do not have a required minimum distribution. While they are similar to traditional IRAs, there are some differences which have to be considered when an investor is choosing which plan to use for their retirement. One of the big draws, however, for Roth IRAs is that while they are taxed upfront, earnings are not taxed after a certain age and there are no required withdrawals once the Roth IRA has matured.
While, again, it will be dependent upon an individual’s financial situation and preferences as to whether they choose a traditional IRA or Roth IRA, some fear that these required withdrawals may cause problems in the future and are beginning to see Roth IRAs in a more favorable light.