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The “Secure Act” has killed the “Stretch IRA”!

By Bruce Hosler EA, CFP®, AIF®, CEPA®, CDFA®

Technically the term “Stretch IRA is a made-up term used in the financial services industry to describe the distribution benefits that used to be afforded to the beneficiaries of an inherited IRA. That ended in 2019 when Congress passed the “Secure Act”.

The “Secure Act” killed the ability of IRA beneficiaries to take required minimum distributions over their remaining life expectancy period. The “Stretch IRA” allowed the beneficiary to only take a small RMD (Required Minimum Distribution) amount every year. Such a low required minimum distribution rate would generally permit an IRA beneficiary that was 20 or 30 years younger than their parent to make that IRA account last for 30, 40, or maybe even 50 years.

The “Secure Act” has replaced the “Stretch IRA” with the new “10-year rule”. The 10 year rule affects all IRA beneficiaries except for five special exceptions: Spouses , the chronically ill , those with disabilities , minors until they reach the age of majority , and those that are less than 10 years younger than the deceased IRA owner.

Roth IRA’s will also be subject to the “10-year rule”, but as you can imagine the planning for such accounts that are tax free federal and state requires special planning.

If you Leave a $1,000,000 IRA account to your son, over ten years it could double to $2,000,000. What if he waited until the 10th year and pulled it all out in one year? Can you imagine the tax rates federal and state on your life’s savings?

Don’t miss out on this time-sensitive planning for your beneficiaries.

YES! Send me Bruce’s Whitepaper.

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*The 2021 ranking of the Forbes’ Best–in–State Wealth Advisors(1) list was developed by SHOOK Research and is based on in-person and telephone due–diligence meetings to evaluate each advisor qualitatively and on a ranking algorithm that includes client retention, industry experience, review of compliance records, firm nominations, and quantitative criteria (including assets under management and revenue generated for their firms). Overall, approximately 32,725 advisors were considered, and 5,000 (approximately 15.3 percent of candidates) were recognized. The full methodology(2) that Forbes developed in partnership with SHOOK Research is available at www.forbes.com. (1) This recognition and the due-diligence process conducted are not indicative of the advisor’s future performance. Your experience may vary. Winners are organized and ranked by state. Some states may have more advisors than others. You are encouraged to conduct your own research to determine if the advisor is right for you. (2) Portfolio performance is not a criterion due to varying client objectives and lack of audited data. SHOOK does not receive a fee in exchange for rankings.

This communication strictly intended for individuals residing in the states of AK, AZ, CA, CO, FL, GA, ID, IL, ME, NM, NV, OH, TX, UT, VA, WA, WI. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services. Investments are not FDIC- or NCUA-insured, are not guaranteed by a bank/financial institution, and are subject to risks, including possible loss of the principal invested. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA / SIPC, a Registered Investment Adviser. Fixed insurance products and services offered through CES Insurance Agency. Tax preparation, tax planning and accounting services offered through Hosler Wealth Management are separate and unrelated to Commonwealth. Hosler Wealth Management does not provide legal advice. You should consult a legal professional regarding your individual situation.