So what exactly is a stretched IRA?  If you haven’t taken the time to educate yourself on the term by now, you are probably missing out on a lot of benefits that the government could take control of when you pass on.  A stretch IRA will create a long term retirement account that lasts for decades after you pass away.  Your beneficiaries have ultimate control over the assets, rather than allowing the government to take over.

Stretch IRA’s provide quite a few benefits outside of keeping the government away from your money when you go, such as allowing flexibility in how your beneficiaries withdrawal the money from the IRA.  If your beneficiaries pay close attention to their taxes, and end up showing losses for a tax period, they are able to pull money from the account to offset the losses on their filing.  This means that it was essentially a tax-free withdrawal from the account.

Most beneficiaries are also unable to purchase these types of accounts, which will make it highly sought after among people under the age of 59 ½.  Being unable to make withdrawals from their own IRA accounts, these individuals under the age of 59 ½ will be able to withdraw money from the stretch IRA without having to incur any fees or penalties, allowing them to control the wealth that they have inherited, and continue building on it.

You will want to make sure, though, that before your beneficiaries take any funds from the stretch IRA account, that they understand the tax liabilities associated with full distribution.  The IRS will require taxes to be paid upon full distribution of the IRA, which will be included on their personal tax return.  If they have other household taxes, the totals could amount to a large number that could actually increase the overall household income into a higher tax bracket.

Inheriting a personal retirement account is a large asset for your beneficiaries to capitalize on if done properly.  Carrying on your family’s legacy will be incredibly easy with inherited wealth, rather than your family having to build their financial foundation from scratch.  Using tax-deferred inherited wealth, your beneficiaries can protect their finances through to their own death.  Their families and children will receive the benefits of your hard work for many years, and this wouldn’t have happened if you hadn’t taken the time to educate yourself on different options for your individual retirement account.

Planning for your future is something that you’ve done your entire life, but you may not have thought about planning far enough ahead.  When you pass on, you’ll want to leave behind more than just memories, so consider using the stretch IRA strategy to pass on your hard work and legacy to upcoming generations.