What Is a Stretch IRA?

By Dr. Jim Dahle, WCI Founder

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 Fourteen years later, somebody commented that it was out of date, and I realized I had never written another article with “Stretch IRA” in the title (although we had certainly covered the subject in articles like this one on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

So, I updated this article in July 2025.

What Is a Stretch IRA?

“Stretch IRA” is a term mostly used before the Secure Act was passed in late 2019. Plenty of articles at that time referred to the “Death of the Stretch IRA.” Prior to the Secure Act, money in an IRA, whether traditional or Roth, could be left mostly inside that account, where it could continue to enjoy tax-protected growth. Required Minimum Distributions (RMDs) did apply, but they were calculated based on age. So, if you left the IRA to someone very young, they may only have to withdraw 1% or 2% of it a year. If it then grew at 5%, 10%, or more a year, the actual balance of the IRA would climb. Even after decades of RMDs, that heir may have a balance that is 10 times as large as it was at the time of inheritance. With the Secure Act, Congress indicated that it thought this tax treatment was too generous, so it put rules in place limiting how much those IRAs could be stretched.

More information here:

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The 10-Year Rule

The main change was to implement a 10-year rule, which required the balance of most IRAs inherited after the Secure Act passed to be withdrawn within 10 years. No more stretching an IRA for 30, 50, or even 90 years.

More Complicated RMD Rules

Unfortunately, the rules were made even more complicated than just implementing the 10-year rule. For example, if the decedent was already of RMD age and died before the Secure Act passed, you, as the beneficiary, are required to also take RMDs. Even if the decedent wasn’t taking them because they had a Roth IRA (which doesn’t have an RMD requirement), the heir still must take the RMDs because once Roth IRAs are inherited, RMDs become required. Thankfully, there are some really nice calculators out there, such as this one from Vanguard, that help you determine your RMD requirements.

Here are the basic rules:

• If you inherited the IRA prior to the Secure Act passing, the old rules apply, and you can stretch the account for decades.
• If you inherited the IRA after the Secure Act passed, the 10-year rule applies (i.e., the entire balance must be distributed by the end of the 10th year after death).
• If the inheritor is a special person, called an “Eligible Designated Beneficiary” (EDB), there are even more unique rules. EDBs include:
  • The spouse of the decedent
  • The minor child of the decedent (but only until they turn 18)
  • Someone not more than 10 years younger than the decedent
  • A disabled or chronically ill individual, as defined by the IRS
• EDBs can use the lifetime distribution rules in place prior to 2020. That is to say, they get a true “Stretch IRA” because the IRS figures they won’t be able to stretch it for all that long.
• If the inheritor is not a person (such as a trust or estate), a five-year rule applies (i.e., the entire balance must be distributed by the end of the fifth year after death).
• In addition to the 10-year (or five-year) rule, there are also RMDs required during that period if the decedent would have been old enough to have been required to take them on a traditional IRA, whether the inherited account is traditional or Roth.

Trust me, this is complicated. Use the linked calculator to sort out your RMD requirement.

Stretch IRAs are not as available as they once were, but the principles still apply. Tax-protected growth is valuable, and if you don’t need the money, you should generally extend the time that money spends in a tax-protected account for as long as you can.

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

[This updated post was originally published in 2011.]