Because there is no required minimum distribution with a Roth IRA, most of the people we talk to about their Roth IRA accounts are thinking the best thing to do is to leave the account alone, ideally, never touching it themselves, and leaving it to their kids or other family members. If you are an heir, it's much better to inherit a Roth IRA compared to a traditional IRA, but if you own a Roth IRA account, and you need to take money from your investment accounts during retirement it just might make sense to tap your Roth IRA.
First, if you retire before turning age 59.5, you probably know there's early withdrawal penalties and regular income taxes that you'll have to pay if you take money out of IRAs or 401(k)s. But, this is not the case if you take money out of a Roth IRA, at least money that has already been taxed. These would be contributions you made during the life of the account, as well as any Roth IRA conversions, which is when you convert IRA money to Roth IRAs. In fact, the tax law says distributions from your Roth IRA typically come first from contributions. In other words, you can't withdraw earnings until you've withdrawn all contributions.
Another area where it might make sense to tap into your Roth IRA is if taking distributions from your regular retirement money would push you into a higher tax bracket. Then you'd want to take the maximum distribution from your regular retirement money without pushing you into the higher tax bracket, and then you make up the difference in income from taking a distribution from your Roth IRA account. This way you get the income you need from your investments without having to move to the next highest tax bracket.
Another instance where it might make sense for you to tap into the Roth IRA is if your kids or heirs are in a lower tax bracket compared to you. Then it might make sense for them to inherit your traditional IRA. Take the minimum distributions as a beneficiary and pay the tax on those at their lower tax rate instead of pulling money from your IRA at a higher tax rate.
Of course, things get a little complicated once you turn 70 and must take required minimum distributions from an IRA which is really the message I wanted to convey to you today. That message is: depending on your situation, taking distributions from a combination of both your IRA and Roth IRA just might make more sense than planning to leave all of your Roth IRA to your heirs. As you might imagine setting up an income distribution strategy in retirement from your various investment accounts, and doing it in the most tax efficient manner is a critical step towards your being able to experience your version of an incredible retirement doing what you want when you want.