- Stretch IRA Strategy
Stretch IRA strategy is applicable only for those who don’t need to withdraw the full balance of the Individual Retirement Account (IRA). Those people, who want to delay distributions from the IRA account and defer tax payments, tend to apply this estate planning concept.This strategy allows the beneficiary of an Individual Retirement Account to push the benefit to his next generation by forgoing current withdrawal. So, the account balance keeps growing for long times and keep generating tax-deferred savings.But IRS has set rules so that you must withdraw a minimum amount of money mandatorily. This is also the smallest amount of dollar you need to withdraw without paying any penalty. But delaying is not certainly the profitable options as the Federal and State tax rate is supposed to increase over the time.
If you have your spouse as the beneficiary of the account:
If you have chosen your spouse as the beneficiary of the IRA account, the RMD amounts will be withdrawn by you till you are alive. After your death, the IRA is rolled over to your spouse’s IRA.
If your beneficiary is not a spouse:
If the beneficiary is someone (group of people) other than your spouse, the rule is almost same except the beneficiary will be able to withdraw from the IRA based on the oldest beneficiary’s life expectancy.
- Owner’s birth date
- Birth date of the account owner. This is required to find out the when the minimum distribution will begin.
- Owner’s age at death
- The possible age when the account owner will die as per the uniform life expectancy table.
- Previous year end value
- Value of the Individual Retirement Account (IRA) on 31 st December of the previous year. This should be stated by the fair market value of the account.
- Annual rate of return
- The rate of return you expect to earn every year from the Individual Retirement Account.
- Plan type
- The type of your retirement plan. This will not affect the overall calculation.
- Beneficiary birth date
- Date of birth of the IRA’s beneficiary.
- Is beneficiary a spouse? Checkbox
- Checking this box will adjust the whole calculation as per the rule of choosing your spouse as beneficiary. This rule is briefly discussed under ‘Stretch IRA Strategy’.
- Beneficiary’s age at death
- The possible age at which (as of 12/31) the beneficiary is supposed to die.
- Spouse’s beneficiary’s birth date
- Date of birth of your spouse’s beneficiary. This is required to estimate the life expectancy of this second beneficiary in case your spouse is the first beneficiary.