By Jeremy T. Rodriguez, JD
IRA Analyst


My Daughter is a 30-year old RN and I want to help her contribute to an IRA.  She has a 401K at the hospital where she works, but she only contributes to maximize their 4% matching.  It is my understanding she can still contribute (up until April 15th, 2019) $5,500 to either a 2018 ROTH or a 2018 traditional IRA.  At her age, the growth on an IRA over time should be huge. Would a ROTH always be a better IRA to put her $5,500 and forgo the reduction on her taxable income from the traditional IRA?





I completely agree with everything you’ve said. Your daughter should continue to contribute to her employer at least up to the amount necessary to get the maximum matching contribution. Anything less is leaving money on the table. If an individual has extra money, whether they should stick that in a qualified plan or an IRA depends on several considerations, such as the plan’s fees and investment options, which are limited. Weigh these considerations, in addition to the ERISA creditor protection, against what could be obtained in an IRA. Bear in mind that the value of ERISA’s creditor protection really depends on the individual’s exposure.

However, you are right to advocate for a Roth IRA over a traditional IRA. Foregoing a tax deduction, especially at today’s low rates, is a low cost to obtain the benefits of a Roth IRA. Those benefits include no required minimum distributions during the IRA owner’s life and tax-free withdrawals if your daughter meets the qualified distribution rules when she eventually takes money out. Thus, I always recommend that a younger person look at opening a Roth IRA versus a traditional IRA. Moreover, if an emergency occurs and she needs immediate cash, she can always withdraw her Roth IRA contributions tax and penalty-free.



I really enjoy your column and find it quite informative…however, I have a question that I am getting confusing advice on.

I am 61 and getting ready to retire.  Several years ago I established a trust. My wife is the primary beneficiary for our estate and I have made the trust the contingent beneficiary.  My IRA’s (both Traditional and Roth) are in the trust as well as my 401K.  I have now read that you should not put your IRA’s or 401K in a trust, just list out the primary and contingent beneficiaries (spouse & children).  Am I taking the correct approach by assigning the trust as contingent beneficiary for my IRA’s and 401K?  I also have an inherited IRA that I am not sure what to do with.  I am already taking RMD’s from this and wondering as well, should the trust be the contingent beneficiary or just list my spouse and children as beneficiaries?

Thank you!


To start, you cannot put your IRAs in a trust during your lifetime. That creates a taxable transfer and eliminates the IRA. Instead, you are talking about naming your trust as your IRA beneficiary. Whether that makes sense depends on your personal situation. However, keep in mind that there are no tax benefits to be gained by naming a trust as the IRA beneficiary versus naming individuals outright on the beneficiary designation form. Naming a trust as your IRA beneficiary creates complexity. This could make sense if there are reasons for that complexity, such as the beneficiaries have a physical or mental condition that prevents them from managing finances.

When it comes to the IRAs you own, if you name the trust as the beneficiary, you limit the options that would otherwise be available your spouse and children. If they were named outright, they could split the IRA and use their own life expectancy for post-death required minimum distributions. If the trust is a beneficiary, then the age of the oldest beneficiary will be used for all.

Finally, when it comes to the inherited IRA, the rules are a little different. Whomever is your beneficiary (called a successor beneficiary under the tax code) will adopt your post-death distribution schedule. That means they are not using their own life expectancy. However, if your trust becomes the beneficiary of your inherited IRA, any assets that are retained within the trust will be subject to the highest tax rate much sooner than if the assets were left to an individual.

Essentially, this is a long-winded way of saying whether your trust should be the beneficiary of either the IRAs you own or inherited is a complicated question that depends on your individual situation. Therefore, I would highly recommend you consult with a knowledgeable advisor and straighten all this out. Any decisions you’ve previously made can be easily changed while you are alive. However, once you pass away, all bets are final.