One of the most common questions we hear from retirees and pre-retirees is: “What’s the best way to leave money to my loved ones — life insurance, a Roth IRA, or both?”

Both can be powerful legacy tools. But they work in very different ways — and as rules around retirement and estate planning keep changing, it’s important to know how those changes might affect your family.

If you haven’t reviewed your legacy plan recently, now is the time. Waiting could mean fewer options or unexpected tax consequences for your heirs.

🎥 Watch our short video overview:

Quick Comparison

• Roth IRA = Bucket with a lid → limited contributions, tax-free growth, but heirs generally must empty the account within 10 years.
• Life Insurance = Parachute → no IRS contribution limits, immediate payout to loved ones, and in some cases, it can even be structured outside your taxable estate.

Three Key Differences

1. Estate Taxes & Inheritance Rules
   • Roth IRAs are always counted as part of your estate.
   • Life insurance, if structured properly, can sometimes be excluded — which may reduce estate taxes for certain families.
2. Contribution & Coverage Limits
   • Roth IRA contributions are capped each year ($7,000, or $8,000 if you’re 50+ in 2025).
   • Life insurance doesn’t have IRS contribution limits, though your coverage depends on health and financial circumstances.
3. Beneficiary Distribution Rules
   • Roth IRA heirs must withdraw the full account within 10 years (per SECURE Act rules).
   • Life insurance beneficiaries typically receive the payout immediately — no required distributions.

Checklist for Reflection

Before choosing, ask yourself:

• Do I want my heirs to receive funds gradually or all at once?
• Am I likely to face federal or state estate taxes?
• Do I want flexibility beyond annual IRS contribution caps?
• Do I want to leave funds tax-free or taxable?
• How important is predictability vs. flexibility for my heirs?
• Do health considerations affect whether life insurance is even an option for me?

Our Perspective

At Richmond Brothers, we believe leaving a legacy is about more than money — it’s about creating peace of mind for you today and clarity for your family tomorrow. A legacy plan should reflect both your values and your finances, so your family has confidence no matter what headlines bring.

👉 Download the free guide from Ed Slott & Company: Leaving a Legacy: Life Insurance vs. Roth IRAs

If you’d like to explore how these tools might fit your retirement and estate strategy, call us at (517) 435-4040 or send us an email.

Advisory services are offered through Richmond Brothers, Inc., a Registered Investment Adviser. Insurance products are offered through licensed insurance professionals within Richmond Brothers. Investing involves risk, including the possible loss of principal. Registration as an investment adviser does not imply a certain level of skill or training.

Guarantees are based on the claims-paying ability and financial strength of the issuing insurance company.

Insurance products, including annuities and any optional long-term care, chronic illness, or other living benefit riders, are issued by the applicable insurance company. Product features, benefits, riders, limitations, costs, and availability vary by product and by state.

Optional riders are generally available for an additional cost and are subject to eligibility requirements, terms, conditions, limitations, exclusions, and underwriting or benefit qualification requirements, as applicable. Please refer to the applicable policy or rider for complete details.

Long-term care or chronic illness benefits, if elected, may be intended to receive favorable tax treatment under applicable federal tax law. Tax treatment depends on individual circumstances and is subject to change. Clients should consult their tax advisor regarding their specific situation.

Annuities are long-term financial products designed for retirement or other long-term objectives. They may involve fees, expenses, investment risk (where applicable), withdrawal limitations, and surrender charges. Early withdrawals may be subject to surrender charges and, if taken before age 59½, may also be subject to IRS penalties.

Long-term care or chronic illness riders are not a substitute for comprehensive long-term care insurance. Benefits are subject to the terms and conditions of the applicable rider and policy.

Refer to the specific product materials for complete details, including product availability, state approvals, and applicable limitations.