Financial Planning

When it comes to the world of financial and retirement planning it seems that there are always a ton of acronyms and words that just aren’t self evident as to what they mean.  And that is for the financially savvy people out there.  You can almost forget about it when you are talking about a lay person trying to navigate the world of retirement planning and what all the tools available are.  The stretch IRA is one of those tools that is sometimes bandied about, but it seems like almost no one knows what it is.

A stretch IRA is a term that mean that you are able to stretch the usage of your IRA past the death of the individual who owns the IRA.  The most common reason people use this is to avoid as many taxes as is possible.  And when it comes to estate planning, the vast majority of the decisions are based upon what is the best course of action tax wise.

And to be sure, a stretch IRA is not for everyone, just like debt consolidation loans aren’t for everyone.  First off, the premise has to be that the funds in your IRA are still going to be around past the end of your time on this earth.  There is no sense setting up a stretch IRA if you are planning on using up all of your nest egg while still roaming about.  The whole concept is to shelter a portion of the IRA from estate investment taxes past your unfortunate death.  For those that are well off, this is a valid concern.

To that end, the people who should be considering whether a stretch IRA is right for them are the same people that generally have been contemplating their retirement requirements for quite some time.  If you are nearing retirement with a sizable chunk of change sitting there for yor disposal that you likely aren’t going to use up before leaving this planet, a stretch IRA may be better than even the best Roth IRA out there!