07/07/2023
Is a Roth IRA better than Cash Value Life Insurance?
Itās a good question. Here is the first thing you need to be aware ofā¦.the Internal Revenue Service demands that a 1099 be issued whenever any distribution is taken. A 1099 is the tax form that the government collects to make sure they know how much income you have received in a given year.
Here is the second, and maybe bigger question. āWHYā is the government demanding a 1099 on a Roth IRA when accumulation and distributions are supposed to be tax exempt and have no impact on Social Security, federal or state taxes?
Maybe it has to do with the government ākeeping their options openā. There are conversations going on in Congress right now about making Roth distributions subject to off-setting Social Security income or allowing states to impose an income tax. This is not in law right now, it is being discussed.
So when you think about is a Roth better than life insurance you need to know that Senator Roth copied the life insurance code almost verbatim to create the Roth IRA. However, what he did is put restrictions on how much you could put in, qualification restrictions, accumulation restrictions, distribution restrictionsā¦all of these caveats that go with the Roth that make it more complicated than life insurance.
With a properly designed Cash Value Life Insurance policy, there is no maximum contribution according to the government. There is no income tax due in the distribution strategy we employ here at Roc Financial Group. It accumulates exempt from taxation, itās paid out exempt from taxation, and it is transferred to our beneficiaries exempt from income taxation.
Doe a Roth provide all of those benefits? No.
Is a Roth IRA better than other āqualified plansā? Yes.
Is a Roth better than a properly designed Cash Value Life Insurance Policy? You decide.
