Stretch IRA

A Stretch IRA is a wealth-transfer strategy that was used to extend the tax-deferred status of an Individual Retirement Account (IRA) by beneficiaries of these accounts. This strategy aimed to "stretch" the life—and thus the tax advantages—of an IRA by limiting the withdrawals to the required minimum distributions (RMDs) over the beneficiary's life expectancy.

Here's how it worked: when the owner of the IRA passed away, instead of the beneficiaries liquidating the account, they could instead base the RMDs on their own life expectancy. If the beneficiary was younger, this could significantly extend the tax-deferred growth of the IRA, as younger beneficiaries would have smaller RMDs, allowing more money to stay in the IRA and potentially grow over time.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 in the United States eliminated the Stretch IRA strategy for most non-spouse beneficiaries. Instead, non-spouse beneficiaries are typically required to distribute the entire inherited IRA within 10 years of the original account owner's death.

Please consult a financial advisor for the most up-to-date information, as rules can change and vary based on different circumstances.