Episode #29: 3 Things To Know About Stretch IRAs

Today’s Prep:

When inheriting an IRA, you may have the option of a Stretch IRA. David walks us through what a stretch IRA is and how it can work for you. This is incredibly important to understand if you might inherit an IRA because it may change your options when it comes to tax strategies and building wealth.

(Click the featured times below to jump forward in the episode)

Equipping Points:

 [0:56] What is a Stretch IRA?

  • If you inherit an IRA you have an option of not only inheriting the money but also the IRA structure.
  • David gives an example of a family with an opportunity for a Stretch IRA.
  • Once you have a Stretch IRA, you can invest that anywhere. The key here is maintaining the tax structure.

[2:53] #1 – Each beneficiary can choose their own inheritance method.

  • David shares an example of how three different beneficiaries can choose to do what they want with their inheritance.
  • Each person has their own needs and goals, which can be considered when determining what to do with inheritance.

[4:13] #2 – If you decide to stretch, you decide how and when to take the money.

  • Like required minimum distributions, once you inherit an IRA, there is a schedule to follow when taking money out of the account.
  • David shares the example of someone choosing to take money out for a big expense while another person decides to take only the minimum requirement out.
  • The percentage that needs to be taken out goes up a little each year.
  • The tax burden gets spread out over several years if you have a Stretch IRA.

[9:35]  #3 – Make sure to title the new account correctly.

  • If the initial account is set-up incorrectly, the whole thing is taxable, and that’s an irrevocable mistake.
  • David shares an example of someone who was about to have a Stretch IRA and how it needed to be titled correctly.
  • It’s important to understand the range of choices available in order to determine what is best.
  • Finally, David talks about some upcoming changes proposed in Congress.

Today’s Takeaway:


More From David:

The host: David Dickens

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