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.