No. of Recommendations: 4
I have been reading Ed Slott's new book and I came across this idea and thought I'd share it. It is called the 
stretch IRA.  What it means is an IRA owner (preferably a Roth IRA) can name a beneficiary to receive the IRA 
after they die.  The inheritor can then stretch the minimum required distributions over their lifetime.  And, 
AND (can you tell I'm excited about this?) if the IRA is a Roth IRA, those distributions are tax free!

So, what happens if the inheritor is a grandchild?  Hmmm... very interesting.  Here's what the math looks like:

Assumptions

IRA Value at death: $100,000
Child's age: 10
Estate tax involved: no, for this illustration we will assume that the estate is within in exemption.
Expected ROR on the Roth during the stretch: 10%

         Account     Life                     10%         Ending
Age      Value       Exp.        MRD         Growth       Balance
10       $100,000    72.8        -$1,374      $9,863      $108,489
11       $108,489    71.8        -$1,511     $10,698      $117,676
12       $117,676    70.8        -$1,662     $11,601      $127,615
13       $127,615    69.8        -$1,828     $12,579      $138,365
14       $138,365    68.8        -$2,011     $13,635      $149,990
15       $149,990    67.8        -$2,212     $14,778      $162,555
16       $162,555    66.8        -$2,433     $16,012      $176,134
17       $176,134    65.8        -$2,677     $17,346      $190,803
18       $190,803    64.8        -$2,944     $18,786      $206,644
19       $206,644    63.8        -$3,239     $20,341      $223,746
20       $223,746    62.8        -$3,563     $22,018      $242,201
21       $242,201    61.8        -$3,919     $23,828      $262,111
22       $262,111    60.8        -$4,311     $25,780      $283,579
23       $283,579    59.8        -$4,742     $27,884      $306,721
24       $306,721    58.8        -$5,216     $30,150      $331,655
25       $331,655    57.8        -$5,738     $32,592      $358,509
26       $358,509    56.8        -$6,312     $35,220      $387,417
27       $387,417    55.8        -$6,943     $38,047      $418,521
28       $418,521    54.8        -$7,637     $41,088      $451,972
29       $451,972    53.8        -$8,401     $44,357      $487,929
30       $487,929    52.8        -$9,241     $47,869      $526,556
31       $526,556    51.8       -$10,165     $51,639      $568,030
32       $568,030    50.8       -$11,182     $55,685      $612,533
33       $612,533    49.8       -$12,300     $60,023      $660,257
34       $660,257    48.8       -$13,530     $64,673      $711,400
35       $711,400    47.8       -$14,883     $69,652      $766,168
36       $766,168    46.8       -$16,371     $74,980      $824,777
37       $824,777    45.8       -$18,008     $80,677      $887,446
38       $887,446    44.8       -$19,809     $86,764      $954,400
39       $954,400    43.8       -$21,790     $93,261    $1,025,871
40     $1,025,871    42.8       -$23,969    $100,190    $1,102,093
41     $1,102,093    41.8       -$26,366    $107,573    $1,183,300
42     $1,183,300    40.8       -$29,002    $115,430    $1,269,727
43     $1,269,727    39.8       -$31,903    $123,782    $1,361,607
44     $1,361,607    38.8       -$35,093    $132,651    $1,459,165
45     $1,459,165    37.8       -$38,602    $142,056    $1,562,619
46     $1,562,619    36.8       -$42,462    $152,016    $1,672,172
47     $1,672,172    35.8       -$46,709    $162,546    $1,788,010
48     $1,788,010    34.8       -$51,380    $173,663    $1,910,293
49     $1,910,293    33.8       -$56,518    $185,378    $2,039,153
50     $2,039,153    32.8       -$62,169    $197,698    $2,174,682
51     $2,174,682    31.8       -$68,386    $210,630    $2,316,926
52     $2,316,926    30.8       -$75,225    $224,170    $2,465,871
53     $2,465,871    29.8       -$82,747    $238,312    $2,621,436
54     $2,621,436    28.8       -$91,022    $253,041    $2,783,455
55     $2,783,455    27.8      -$100,124    $268,333    $2,951,664
56     $2,951,664    26.8      -$110,137    $284,153    $3,125,680
57     $3,125,680    25.8      -$121,150    $300,453    $3,304,983
58     $3,304,983    24.8      -$133,265    $317,172    $3,488,889
59     $3,488,889    23.8      -$146,592    $334,230    $3,676,527
60     $3,676,527    22.8      -$161,251    $351,528    $3,866,803
61     $3,866,803    21.8      -$177,376    $368,943    $4,058,369
62     $4,058,369    20.8      -$195,114    $386,326    $4,249,581
63     $4,249,581    19.8      -$214,625    $403,496    $4,438,451
64     $4,438,451    18.8      -$236,088    $420,236    $4,622,600
65     $4,622,600    17.8      -$259,697    $436,290    $4,799,194
66     $4,799,194    16.8      -$285,666    $451,353    $4,964,880
67     $4,964,880    15.8      -$314,233    $465,065    $5,115,712
68     $5,115,712    14.8      -$345,656    $477,006    $5,247,061
69     $5,247,061    13.8      -$380,222    $486,684    $5,353,523
70     $5,353,523    12.8      -$418,244    $493,528    $5,428,807
71     $5,428,807    11.8      -$460,068    $496,874    $5,465,613
72     $5,465,613    10.8      -$506,075    $495,954    $5,455,491
73     $5,455,491    9.8       -$556,683    $489,881    $5,388,689
74     $5,388,689    8.8       -$612,351    $477,634    $5,253,972
75     $5,253,972    7.8       -$673,586    $458,039    $5,038,424
76     $5,038,424    6.8       -$740,945    $429,748    $4,727,228
77     $4,727,228    5.8       -$815,039    $391,219    $4,303,407
78     $4,303,407    4.8       -$896,543    $340,686    $3,747,550
79     $3,747,550    3.8       -$986,197    $276,135    $3,037,488
80     $3,037,488    2.8     -$1,084,817    $195,267    $2,147,938
81     $2,147,938    1.8     -$1,193,299     $95,464    $1,050,103
82     $1,050,103    0.8     -$1,050,103          $0            $0
                             $14,162,655
So, in this example, if this girl took just the minimum required distributions each year and allowed the rest of the IRA to continue to grow, over her lifetime she would receive over $14,000,000 from a $100,000 IRA. That's pretty incredible. Anyway, I thought this was worth sharing. I'm also going to post this on my blog. JLP http://AllThingsFinancial.blogspot.com
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