Stretch IRAs

What is a "stretch" IRA?

The term "stretch IRA" has become a popular way to refer to an IRA (either traditional or Roth) that has provisions that make it easier to "stretch out" the time that funds can stay in the IRA after the death of the owner. A stretch IRA is not a special type of IRA under the Internal Revenue Code. It's just a traditional IRA or Roth IRA that has language (in the custodial or trust document that governs the IRA) giving a beneficiary (and backup contingent beneficiaries) the option to take distributions from an inherited IRA over the beneficiary's life expectancy. This language also generally allows successor beneficiaries to be named, facilitating the continued tax-deferred growth of the IRA over (possibly) more than one generation. There's nothing really dramatic about this "stretch" language; any IRA provider can include it. The fact is, though, many don't. Absent the "stretch" language, IRA funds might have to be distributed on a more aggressive basis upon the death of the IRA owner or the original beneficiary.

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