Stretch IRA Strategies refer to a set of techniques used to maximize the tax benefits and inheritance potential of an Individual Retirement Account (IRA) for beneficiaries.
These strategies allow heirs to "stretch" the tax-deferred growth of the IRA over their own life expectancy rather than depleting the account quickly, thereby minimizing the tax burden and potentially increasing the overall wealth passed on.
For example, when a traditional IRA owner passes away, their beneficiaries can take distributions based on their life expectancy rather than being forced to withdraw the entire balance quickly. This approach can significantly increase the amount of wealth that continues to grow tax-deferred for a longer period, benefiting the beneficiaries financially. However, it is essential to consider the rules set forth by the IRS regarding inherited IRAs, particularly following changes introduced by the SECURE Act, which may affect the applicability of stretch strategies.
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