Your primary goal in saving for retirement may be to ensure that you have enough money to cover your expenses during your senior years. But you may also have a secondary goal -- to amass enough of a fortune to leave some of that wealth behind to your heirs, whether it's your grown kids or your grandchildren.
The problem, though, is that most tax-advantaged retirement savings plans make it difficult to leave money behind to your loved ones. That's because most of these plans impose what are known as required minimum distributions, or RMDs.
RMDs begin at age 72, and the amount you're forced to remove from your savings each year hinges on your account balance and your life expectancy at the time. Failing to take an RMD results in a huge penalty -- losing 50% of the sum you fail to remove.
Not only can RMDs increase your tax burden during retirement (if you're forced to take withdrawals from a traditional 401(k) or IRA, that money becomes taxable income), but they also effectively force you to spend down your savings in your lifetime rather than leaving it in an account that enjoys beneficial tax treatment. And so if you want to avoid RMDs and get the option to pass wealth down to your heirs, it pays to house your savings in a Roth IRA.