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MONEY MATTERS: Stretch IRA

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How does a Stretch IRA differ from other IRA's?

Well, really it's not a different IRA. What it is is a mechanism to take an IRA that you have and stretch it out a second lifetime. So for example, lets say a guy is retired. He taken out his required distribution every year. If he would pass away, he could will it to his wife and then she can wait until she is 70 1/2 before she has to start taking it out. Then when she starts taking it out and she passes away, they leave it to their two children. Lets say the two children are in their thirties. Well the IRS says they can take it out over their lifetime which they are much younger. So really, what your doing is, you hope the growth is out producing what the IRS is forcing you to take out, so you are stretching it out through their lifetime as well.

Is there any type of paperwork that you have to file with the IRS or the government to do a stretch IRA?

What happens if someone passes away and they leave their IRA to their kids, it's a special IRA called a Beneficiary IRA and then the IRS is notified and they have to start taking require minimum distribution depending on the oldest child's age.

How often do you see the Stretch IRA being used?

I don't think a lot of people know about it. Pretty frequently and people it's a whole different type of IRA but it's really not. It's just taking the IRA that you have and having the ability to move it down multi generational is what it amounts to.

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