Surviving Spouse as Sole Beneficiary of Retirement Accounts

More often than not, spouses choose to leave their assets to each other when they die.  When it comes to retirement accounts this decision makes good financial sense as there are specific state and federal rules that favor leaving the account to a spouse.

Benefits of Naming Spouse as Sole Beneficiary of Retirement Account
For instance, a surviving spouse who is named as the sole beneficiary of a retirement account is not required to withdraw the money right after the deceased spouse's death.  This allows the surviving spouse to keep the tax deferred status of the money and not begin making withdrawals until the later of (1) the year the deceased spouse would have turned 70 1/2; or (2) December 31 of the year following the deceased spouse's death.

Tax Advantages of IRA's (Traditional and Roth) and 401(k)'s

I remember working in the banking industry over a decade ago when the Roth IRA was first introduced. For months after the Roth came out I was approached by clients about how the Roth worked and whether they should roll their money into the Roth from their traditional IRA's. Although brand new at the time, it was clear to me that the Roth might work well for my younger clients, but not necessarily for those nearing retirement age.

As the Roth v. Traditional IRA issue has recently come up with a client of mine, I thought I would take a moment to briefly outline the tax advantages of each.

Traditional IRA Tax Advantages
The real benefit to a Traditional IRA is that any money you deposit into the IRA each year (up to the legal limit) can be deducted from your taxes.