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Planning Strategies

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:

  1. 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.
  2. 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.
  3. 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.



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