06 Jan The End of the Stretch IRA And More: Justin Crain, Partner
The End of the Stretch IRA
The Stretch IRA was a financial strategy that allowed inherited IRAs to be stretched out over the lifetime of a beneficiary. To put it another way, Stretch IRAs allowed a beneficiary who was younger than the former owner of the IRA to stretch out distributions over the beneficiary’s (presumably longer) lifetime, resulting in a longer period of time for funds to compound principal and defer tax.
The SECURE Act signed into law on December 20th, 2019 ended the ability to use Stretch IRAs as a financial strategy. Under the new law, beneficiaries inheriting an IRA are required to take the funds out, and pay the appropriate taxes, within 10 years of the death of the original IRA owner.
Changes to Age for IRA RMDs
Another IRA rule that has changed under the SECURE Act is the age at which a traditional IRA owner is required to begin taking their required minimum distributions (RMDs). Previously, an IRA owner was required to start taking distributions out of their IRA by April 1st of the year after turning 70 1/2. The SECURE Act changed that age to 72, unless you are already 70 1/2 or more as of December 31, 2019.
Do you have questions about how the legislative changes may impact you and your family?
Gene Valcke
Posted at 10:30h, 08 JanuaryWe are facing both of these issues. Thank you for the update.
admin
Posted at 12:09h, 08 JanuarySo glad that this article was helpful. Feel free to reach out with any questions.
Cecil Rasor
Posted at 13:18h, 08 JanuaryGreat thanks for the update in law.
Rick
admin
Posted at 13:27h, 08 JanuaryOur pleasure!
David Hallo
Posted at 13:25h, 08 Januaryquestion on the stretch IRA – I am assuming that this applies to both traditional and Roth IRAs? Is that correct?
admin
Posted at 13:27h, 08 JanuaryLet me double check on that and get right back with you, Mr. Hallo.
admin
Posted at 14:01h, 08 JanuaryHi Mr. Hallo! Non-spousal inherited Roth IRAs will have to distribute within 10 years.
admin
Posted at 14:04h, 08 JanuaryWe have gotten a great response on this update here and via email and phone. We will be doing a couple of follow-up postings so stay tuned!
Artie Pagan
Posted at 19:30h, 08 JanuaryGreat information. Thanks for providing it!
admin
Posted at 08:44h, 09 JanuaryMost welcome! We are compiling a few FAQs that we will be posting in the next week or so – be on the look out.