What is a "Stretch" IRA?

A "Stretch" IRA is actually a financial strategy rather than a specific type of IRA, and it extends the tax-deferred status of an IRA that is passed to a non-spouse beneficiary. Non-spousal beneficiaries must take Required Minimum Distributions (RMDs) based on their own life expectancy (as listed in the IRS' Uniform Life Table). By distributing these accounts to younger beneficiaries, the ability to "stretch" the tax benefits via lower RMDs is clear. 

Stretch IRAs are especially beneficial for wealthy retirees with comfortable income situations, and when used with Roth IRAs, they can be attractive given those distributions are generally tax free.  

While Stretch IRAs were not changed with the Tax Cuts and Jobs Act of 2017, there status of the strategy remains under examination due to the potential for a tax-deferral designed for retirement essentially being passed down through generations.