What is a Stretch IRA? | White coat investor

The first article about a Stretch IRA was published on this blog within its first two months, in July 2011. Fourteen years later, someone commented that it was outdated, and I realized that I had never written another article with “Stretch IRA” in the title (although we had certainly covered the topic in articles like this one about RMDs on inherited IRAs).

That’s why I updated this article in July 2025.

What is a Stretch IRA?

“Stretch IRA” is a term that was mainly used before the Secure Act was passed in late 2019. Many articles at the time referred to the ‘Death of the Stretch IRA’. Before the Secure Act, money in an IRA, whether traditional or Roth, could largely remain in that account, where it could continue to enjoy tax-sheltered growth. Required minimum distributions (RMDs) did apply, but were calculated based on age. So if you leave the IRA to someone very young, they may only need to withdraw 1% or 2% of it per year. If it were then to grow at 5%, 10% or more per year, the actual balance of the IRA would increase. Even after decades of RMDs, that heir may have a balance ten times what it was at the time of the inheritance. With the Secure Act, Congress signaled that it thought this tax treatment was too generous, so it set rules that limited how much those IRAs could be stretched.

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The 10-year rule

The most significant change was the implementation of a ten-year rule, which required the balance of most IRAs inherited after the Secure Act was passed to be withdrawn within ten years. You no longer have to stretch an IRA out for 30, 50, or even 90 years.

More complicated RMD rules

Unfortunately, the rules were made even more complicated than just implementing the ten-year rule. For example, if the deceased was already of RMD age and died before the Secure Act was passed, you, as the beneficiary, are required to include RMDs as well. Even if the deceased wouldn’t take them because they had a Roth IRA (which has no RMD requirement), the heir must still take the RMDs because once Roth IRAs are inherited, RMDs become required. Fortunately, there are some really nice calculators, like this one from Forefront, that will help you determine your RMD requirements.

Here are the basic rules:

• If you inherited the IRA before the Secure Act was passed, the old rules apply and you can roll over the account for decades.
• If you inherited the IRA after the Secure Act was passed, the ten-year rule applies (i.e., the entire balance must be distributed at the end of the tenth year after death).
• If the heir is a special person, called an Eligible Designated Beneficiary (EDB), there are even more unique rules. EDBs include:
  • The husband of the deceased
  • The minor child of the deceased (but only until he turns 18)
  • Someone who is not more than 10 years younger than the deceased
  • A disabled or chronically ill individual, as defined by the IRS
• EDBs can use the lifetime distribution rules that were in place before 2020. That is, they get a true “Stretch IRA,” because the IRS numbers say they can’t stretch it that long.
• If the heir is not an individual (such as a trust or estate), a five-year rule applies (i.e. the entire balance must be distributed at the end of the fifth year after death).
• In addition to the ten-year (or five-year) rule, RMDs are also required during that period if the deceased would have been old enough to have needed to withdraw them from a traditional IRA, regardless of whether the inherited account is traditional or Roth.

Believe me, this is complicated. Use the linked calculator to determine your RMD requirement.

Stretch IRAs are no longer as available as they once were, but the principles still apply. Tax-sheltered growth is valuable, and if you don’t need the money, you generally need to extend the time the money spends in a tax-sheltered account as long as possible.

What do you think? Are you stretching your inherited IRA as long as possible? Why or why not?

[This updated post was originally published in 2011.]