A Roth can be a potentially powerful investment and estate planning tool
ATLANTA, April 9, 2014 /PRNewswire/ - Although the idea of a tax-free
retirement account - otherwise known as a Roth individual retirement
account (IRA) - may sound appealing, especially ahead of the April 15
tax deadline, the experts at Atlantic Trust say there is more to
consider.
"Whether a Roth makes sense in a given case will depend on your cash
flow, liquidity needs during retirement and assumptions about taxes and
investment performance," says H. Arthur Graper, managing director for
Atlantic Trust.
In a Roth IRA, taxes are paid when money is put into the account or when
a traditional account is converted or rolled over. Atlantic Trust
experts say that if an individual considering a Roth IRA can't afford
to pay those taxes from assets outside the IRA, or if funding a Roth
would reduce what could otherwise be saved for retirement, a
traditional account might be a better choice. Likewise, because taxes
are essentially "pre-paid" in a Roth, it may be wiser to utilize a
traditional account if you expect to be in a lower tax bracket upon
retirement.
Roth IRAs are attractive for a number of reasons. Unlike traditional
IRAs, funds withdrawn from a Roth account are not subject to taxes
(with some caveats) and carry fewer restrictions on how and when those
funds can be withdrawn. And, there are no required minimum
distributions, depending on how and when the Roth account was set up. A
Roth IRA is also an attractive option for those who wish to grow their
assets for the benefit of their children because the accounts will not
be subject to the same income taxes at the death of the IRA creator
that a traditional account would be, says Graper.
As well, if you think you will be in a higher tax bracket when you
retire and can recoup the money you have paid in taxes when creating a
Roth, you may come out ahead. "If you think your tax rate will be
higher, and you expect to make qualified withdrawals (meaning they are
not subject to a 10 percent penalty) during your life, the scale would
also tip in favor of a Roth," says Graper.
Of course, predicting future tax rates is a wild card, especially for
people who have many years until they retire, which is why Roth IRAs
are more attractive for individuals in their 20s and 30s with many
years of future growth, he says.
Enlisting the help of a qualified wealth management professional to
determine which type of IRA will best support a person's retirement
goals. To learn more about traditional and Roth IRAs, read "To Roth or
Not to Roth?" published by Atlantic Trust and available for download on
the Online Resource Center at www.atlantictrust.com.
About Atlantic Trust
Atlantic Trust is one of the nation's leading private wealth management
firms, offering integrated wealth management for high net worth
individuals, families, foundations and endowments. The firm considers
clients' financial, trust, estate planning and philanthropic needs in
developing customized asset allocation and investment management
strategies. Experienced professionals deliver a broad range of
solutions, including proprietary investment offerings and a robust open
architecture platform of traditional and alternative managers. Atlantic
Trust operates in 12 full-service locations throughout the U.S. with
$24.0 billion in assets under management (as of December 31, 2013). For
more information, visit www.atlantictrust.com.
About CIBC
CIBC is a leading Canadian-based global financial institution. Through
our Retail and Business Banking, Wealth Management and Wholesale
Banking businesses, CIBC provides a full range of financial products to
individual, small business, commercial, corporate and institutional
clients in Canada and around the world.
CIBC Wealth Management provides relationship-based advisory services and
an extensive suite of leading investment solutions to meet the needs of
personal, institutional and high-net-worth clients through an extensive
distribution network,that includes CIBC Private Wealth Management, CIBC
Wood Gundy and CIBC Investor's Edge. Our asset management, retail
brokerage and private wealth management businesses combine to create an
integrated offer, delivered through nearly 1,500 advisors across
Canada. In addition, CIBC Asset Management provides global money
manager services to institutional and high-net-worth clients and
industry-leading retail investment solutions through our two mutual
fund families—CIBC and Renaissance—and the CIBC family of managed
portfolio solutions.
SOURCE Atlantic Trust Private Wealth Management
