There’s a move called the “stretch out” that helps beneficiaries make an inherited IRA last for decades. Heirs, particularly young ones, often choose to take the IRA money in the short term and spend it, subjecting themselves to a big tax bill. The wiser choice? Usually stretch.
If you inherit an IRA from someone who has already started taking RMDs (or who should have based on their age), you’ll use what’s called the single life expectancy calculator method to determine your RMDs. Basically, the IRS gives you a formula (based on your age and the size of the account) that tells you how much to withdraw each year.
If you inherit an account from someone who hadn’t yet hit age 70.5, you can choose the single life expectancy method and stretch the IRA over your lifetime, or you can empty the account over five years (the 5-year method). For most people, using the stretch allows you to boost your retirement income over the long term.