Retirement: Planning Strategies: Leaving A Lasting Legacy
Using a "stretch" IRA can help provide for future generations.
Stretching an IRA is a method of distributing your IRA savings to one or more future generations. Simply stated, with proper beneficiary designations and estate planning, you can potentially leave your loved one(s) a nest egg or an income stream many times greater than its original value.
Here's how an IRA can be stretched over multiple generations:
- You name your spouse or someone else as beneficiary to your IRA and take only the required minimum distributions (RMDs) after you reach age 70½.
- When you pass away, instead of taking a lump sum, your spouse (who may also take over the account as his/her own) or other beneficiary takes only RMDs based on his or her life expectancy from the IRA.* He or she also names a beneficiary.
- When your IRA eventually passes to a beneficiary other than your spouse, he or she will begin taking minimum distributions based on his or her life expectancy and should name beneficiaries. Distributions to future beneficiaries will continue based on the life expectancy of the first non-spouse beneficiary.
To make the most of a stretch strategy, each beneficiary should take only the required minimum distributions. The IRA can continue to "stretch" to future generations as long as the assets have not been fully distributed.
Your financial professional can help you take full advantage of your IRA by using the stretch strategy. He or she can also explain the concept of stretch to your family members so they can continue to extend your IRA on a tax-deferred basis.**
*Required distributions begin at age 70½ if the beneficiary is your spouse.
**Stretching one's assets may not be appropriate in all circumstances such as when the IRA owner needs the IRA to provide for their retirement income or the surviving beneficiaries need the assets in a short period of time.
To obtain a prospectus, download online or call Customer Service at 1.800.222.5852
While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal® is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. For more information about our funds, including their full names, please see the Principal Funds, Inc. prospectus or call Customer Service at 1.800.222.5852.
A mutual fund's share price and investment return will vary with market conditions, and the principal value of an investment when you sell your shares may be more or less than the original cost.
This Web site was created and is maintained by Principal Funds Distributor, Inc. exclusively, and not by the Directors of the funds.
Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc., member of the Principal Financial Group®. Principal Funds Distributor, Principal Shareholder Services, Principal Management Corporation and its affiliates, and Principal Funds, Inc. are collectively referred to as Principal Funds.
Not FDIC or NCUA/NCUSIF insured - May lose value - No bank guarantee - Not a deposit - Not insured by any federal government agency