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How to Stretch Your IRA

  • Anselmo & Wojcicki
  • May 20
  • 3 min read

An Estate Planning Method for Your Retirement Account


We often hear questions from clients about how they can preserve their retirement savings and pass that value along to beneficiaries without the big tax hit. Fortunately, there’s a strategy that allows your retirement accounts to continue growing tax-advantaged for future generations, ensuring your wealth can endure long after you’ve retired. This strategy is called "stretching" your IRA.



What is a “Stretch” IRA?


A “Stretch” IRA isn’t a special type of account, but rather a financial strategy. It refers to a method of passing an IRA (Individual Retirement Account) to your heirs in a way that allows the account to continue growing with tax-deferred or tax-free advantages for as long as legally allowed.


Here’s the basic idea:


  • When someone inherits your IRA, they used to be able to take out the money slowly over their own lifetime, based on their life expectancy.


  • Because those withdrawals were spread out, the rest of the account could continue growing—without being taxed each year.


  • The longer the account stayed intact, the more it could benefit from compounded growth and tax savings.


This is what was traditionally meant by “stretching” an IRA.



Important Update: SECURE Act Changes


In 2020, the IRS introduced significant changes through the SECURE Act that affect how inherited IRAs work.


Most non-spouse beneficiaries who inherit an IRA now must withdraw the entire account within 10 years of the original owner’s death. This effectively ended the traditional “stretch” strategy for many families, because it shortens the amount of time the IRA can remain tax-deferred.


However, there are exceptions. Certain “eligible designated beneficiaries” can still use the lifetime stretch method. These include:


  • A surviving spouse

  • A minor child (not grandchild) of the account holder—until they reach the age of majority

  • Someone disabled or chronically ill

  • Someone who is not more than 10 years younger than the original owner


For everyone else, the 10-year rule applies, meaning the tax benefits of a stretch IRA are no longer available in the same way.



How It Works in Practice


Let’s say you want to leave your IRA to your daughter. Before the SECURE Act, she could stretch distributions over her life expectancy—potentially 30 or 40 years. That meant smaller withdrawals, less taxable income each year, and decades of continued growth.


Under the SECURE Act, unless she qualifies for one of the exceptions, she’ll have to withdraw all of the money within 10 years. That could mean larger taxable distributions in a shorter period—and less long-term growth.



Why You Need Estate Planning for Your IRA


Even with the SECURE Act in place, it’s critical to plan how your IRA will be passed on. There are still strategies that can help minimize the tax burden for your heirs—such as Roth conversions, charitable remainder trusts, or simply adjusting your beneficiary designations.



How We Can Help


If you want to ensure your retirement savings are passed down according to your wishes, or if you have concerns about how the changes brought on by the SECURE Act affect your estate, Anselmo & Wojcicki, LLP is here to help you navigate these complexities. We specialize in estate planning strategies that protect your wealth and ensure your beneficiaries receive the maximum benefit.



About Anselmo & Wojcicki, LLP


Anselmo & Wojcicki, LLP is a multi-disciplinary law practice based in Schaumburg, Illinois, specializing in real estate, estate planning, tax planning, business formation, and the sale and purchase of businesses. Our commitment to our clients and our values set us apart from the crowd. Our team of legal specialists has a wealth of experience and expertise to help you meet your legal needs. We are dedicated to providing quality service and building lasting relationships with our clients.

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