Stretch IRA

Submitted by Justin Cooper on Tue, 2013-08-13 21:19

Can a Stretch IRA be inside of annuity? Can a Multigenerational be setup in an annuity as well? Or is it only for mutual funds and managed accounts?



Submitted by Alan - IRA critic on Tue, 2013-08-13 22:26

  • Since those are basically marketing terms, an IRA could be stretched regardless of what investments are held including just a single stock, although that would be terrible diversification. An annuity IRA that has been annuitized for just the owner’s life will obviously not be inherited by children or anyone else, but a non annuitized IRA can be stretched. Any IRA can be stretched since they all contain the same RMD provisions. How long the IRA lasts is a function of taking minimum distributions only, or perhap using a Roth IRA because there are no RMDs for the owner or surviving spouse. All IRAs will be exhausted at some point since non spouse beneficiaries must all take out RMDs. There have been proposals floated to limit the non spouse beneficiary stretch to just 5 years, and that would pretty much eliminate the “multi” generation marketing ploy if enacted.
  • So how could an IRA be stretched for the longest period of time? By doing as many of the following as possible: Making max contributions and rollovers from other retirement plans, never taking distributions until RMDs, not living too long such that RMDs get large, leave to a younger spouse, have the younger spouse re marry yet a younger spouse etc to delay the onset of RMDs, if not married leave to a great grandchild or grandchild to minimize non spouse RMDs. Only the first non spouse beneficiary gets a new stretch, and that is why once a non spouse beneficiary inherits, the IRA life is limited to that beneficiary’s life expectancy only. Efforts to stretch an IRA to the max will seldom fit any natural family life style or developments.

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