Why the Roth IRA Is Still King

When it comes to planning for retirement, one tool stands above the rest—the Roth IRA. I’ve been in this business long enough to say it confidently: the Roth IRA is the greatest account ever created. It allows your investments to grow tax-free for life and—thanks to the Secure Act’s 10-year rule—can even benefit your heirs with no income tax if structured properly.

One of the most powerful tools available today is the Roth conversion. There are no income limits or dollar caps on how much you can convert, making it incredibly flexible. If you’re sitting on a large pre-tax IRA or 401(k), converting to a Roth while tax brackets are low—like today’s 12%, 22%, and 24% rates—could save you a fortune down the road. Congress actually likes Roth conversions because they generate upfront tax revenue, even if they miss the long-term implications of giving away decades of tax-free growth.

Now, a lot of people worry: what if Congress changes the rules and starts taxing Roth IRAs? While anything is technically possible, it’s highly unlikely. Lawmakers count on the tax revenue they collect today, and changing the Roth rules would hurt their short-term budgets. So for now, the Roth remains one of the safest, most efficient ways to build tax-free retirement income.

That said, legislation has evolved. The Secure Act eliminated the stretch IRA for most non-spouse beneficiaries, meaning inherited IRAs now have to be fully distributed within 10 years. This can lead to big tax burdens for your kids or grandkids if they’re in high-income years when they inherit. One way to reduce that risk is converting those traditional IRAs into Roths now—while tax rates are still favorable—and leaving your heirs tax-free accounts instead.

Estate planning also gets tricky under the new rules. Many older estate plans are now outdated, especially those written before 2020. If you named a trust as your IRA beneficiary, it may no longer work the way you intended. Trusts can still be helpful, especially for post-death control, but the tax rates on traditional IRA distributions through a trust can be steep. The solution? Convert to Roth, and then name the trust as the Roth IRA beneficiary. That way, you still control the money from the grave—without giving the IRS a big cut.

Another solid wealth transfer strategy? Permanent life insurance. Unlike IRAs, life insurance provides tax-free benefits, no required minimum distributions, and far fewer rules. In some cases, it’s a better vehicle for legacy planning than a traditional retirement account.

We also got a great real-life example from Jerry and Tom in Saint Louis. They’ve been saving aggressively and now have $250,000 in pretax accounts, $300,000 in Roth, and $231,000 in taxable brokerage accounts. Their question was whether they should keep contributing to pretax accounts given their high income and plans for Roth conversions in retirement. We told them Roth contributions make a lot more sense right now. With tax rates near historic lows, it’s a smart move. They’re saving $100,000 to $150,000 a year, and even cutting back to $80,000 would still keep them on a very strong trajectory.

Christian and Tiffany from Montana also had some smart planning in place. They want to retire early—between 55 and 60—and live on about $10,000 per month. Right now, they’ve saved $500,000 and are contributing $150,000 per year. If they stay on track, they’re looking at a projected portfolio of $4.3 million by age 70. Their allocation of 80% stocks and 20% individual stocks and Bitcoin is aggressive but manageable. We recommended slowly shifting to a 60/40 mix as they near retirement and watching that 10% Bitcoin exposure closely.

Finally, Frank from Lake Wobegon had an interesting idea. He wants to switch his wife’s teacher salary from being spread over 12 months to just 9 months. Why? So he can invest the larger monthly checks in a brokerage account earning 4% interest instead of letting the school district essentially borrow the money interest-free. It’s a clever plan—as long as they stay disciplined with their spending. Larger checks mean more temptation, but the math does work in his favor if they stick to it.

At the end of the day, whether you’re maximizing Roth conversions, planning for early retirement, or optimizing your paycheck strategy, the common thread is this: financial planning is about proactive, intentional choices. Make those choices now—while tax rates are low and time is on your side—and you’ll be setting yourself up for a truly tax-free, stress-free retirement.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.