What is a Stretch IRA?

stretch iraYou don’t “buy” a Stretch IRA from any company. This is a concept where heirs are able to stretch out how long an inherited IRA can last over their shorter lifespan … while the IRA owner does not this ability. True, the owner can stretch it as long as they live by only taking their Required Minimum Distribution … but the owner’s lifespan is typically shorter than the heir’s lifespan, so more must be withdrawn.

Heirs have a choice, to spend the inherited IRA, or not. But, they have to withdraw a minimal amount called the Required Minimum Distribution (RMD). IRA owners only need to choose (in writing on a designation form with the IRA company) a person, or people, as heirs and the Stretch IRA potential is automatically established.

It is up to each heir how long they are going to stretch it. They could stretch is for one day (spent as soon as they get it), or stretch is out over their lifetime.


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2 Responses to What is a Stretch IRA?

  1. Larry Frank, Sr. October 3, 2016 at 2:56 pm #

    Most people get confused about RMDs when it comes to Roth IRAs and Roth 401ks.

    Roth IRAs: The owner does NOT have to take RMDs. HOWEVER, heirs do! The rules are the same for IRA RMDs.

    Roth 401ks: The owner DOES need to take RMDs, Heirs also do too. The rules are the same for IRA RMDs. How to avoid having to withdraw RMDs from a Roth 401k? Transfer it into your Roth IRA.

  2. Larry Frank, Sr. June 17, 2020 at 11:02 am #

    Note that the SECURE Act of 2019 changed the ability to stretch an inherited IRA or Roth for most heirs and retains it for some heirs. Heirs and owners alike need to understand the differences.


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