Retirement Income Toolbox

August 15, 2017

The following article is a summary of an article that appeared in the July 10, 2017 Investment magazine written by Jeff Benjamin.  I found the information useful and hope that others may learn something new too.


In some cases, Military Widows can contribute up to $500k into a Roth IRA all at once.  Under the current law you have a year to fund the Roth IRA. 

The ability to roll all or part of a military death benefit payout directly into a Roth IRA was part of the 2008 HEART Act, but is not commonly known or properly used, according to the article.

Annual contributions to a Roth IRA are otherwise capped at $5500 per year.  According to  advisors polled that work with individuals in the military, “The Roth makes a lot of sense because the insurance payout is essentially tax-free going into a tax free account, and it doesn’t get any better than that!”.

Under the Heroes Earning Assistance and Relief Tax Act, the entirety of a service member’s life insurance policy up to $500,000 can be rolled directly into a Roth IRA for combat-related fatalities.  If the life insurance policy was less than $500k additional funds may be added up to the $500k cap.

Those interested in this kind of transaction are suggested to reach out to a Financial Advisor familiar with these transactions and the applicable laws governing them.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.