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New Stretch IRA benefit

Posted by Jill Boynton  December 30, 2009 10:16 AM

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Beginning in January, qualified plans have to allow non-spouse beneficiaries (NSB) to roll over an inherited account into an inherited IRA. This is part of the Worker, Retiree and Employer Recovery Act of 2008.

Qualified plans are company retirement plans such as 401(k)s and 403(b)s. Until 2006 these plans did not allow NSBs to roll over an account to an IRA - they were stuck with the qualified plan account and forced to take distributions over a shorter time period than their own life expectancy. This was partially corrected by the Pension Protection Act of 2006, which allowed rollovers but didn't require plans to offer this benefit. The WRERA now makes it mandatory that plans include this option.

The Act also allows non-spouse beneficiaries to roll qualified plan accounts directly to an inherited Roth IRA, something that is not allowed for those who inherit a traditional IRA.

The rules around inherited IRAs and rollovers are complicated so you should always consult an accountant or financial planner when considering moving IRA or retirement plan funds.

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D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit www.morganstanleyfa.com/ringer
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