Case Study: Stretch IRA Concept
plan in which he had chosen the Joint and 100% survivor
option. They did not believe they would ever consume all
of the money in their IRAs and wanted to make sure they
preserved as much as possible for their children’s future.
Mrs. Smith inherited an IRA from
her husband when he died. She
combined it with her own IRA so
she had one large IRA. She and
her husband had three children
and although one child was
very responsible, the other
two seemed to have constant
money problems.
The financial advisor listened to their story and suggested
they consider the Stretch IRA Concept.
Mrs. Smith left equal separate shares to her children
Concerned their children
would not have enough
Mrs. Smith and her late husband were both concerned
that when their children received the money she and her
husband had spent a lifetime building, they would either
quickly spend the money or their son-in-law or daughter-inlaws would do so. They knew their kids had not worked
for the same employer for 40 years as they had and none
of the children were participating in a pension plan. They
were concerned their kids would not have enough money
to ever retire and did not want to see all of the money
consumed in a one year buying spree.
Mr. and Mrs. Smith had several discussions with their financial
advisor. They related to him that they both received social
security, had personal savings and Mr. Smith had a pension
When Mrs. Smith later died, her IRA was worth approximately
$1,000,000. Mrs. Smith had named her three children as
beneficiaries on her IRA but she had also completed the
paperwork for a Stretch IRA for each of her three children.
Under the Stretch IRA Concept, her children each inherited
one third of her IRA which was placed in separate accounts
for each child.
Mrs. Smith completed her Stretch IRA paperwork
Mrs. Smith and her financial advisor completed the Stretch
IRA paperwork which resulted in filling out a form indicating
that the children would receive payments over each of their
individual life expectancies. That meant that if a child had
a 30 year life expectancy in the year following Mrs. Smith’s
death, they received 1/30th the first year 1/29th the second
year and so on until they received all of the payments or
passed away at which time their named heirs received the
balance. The fact that the payment increased each year
provided more money for her children in their retirement and
acted as a hedge against inflation.
If a child died before receiving all
of their payments, Mrs. Smith felt
good that her grandchildren may
then benefit.
Allowed each child to receive
10% upon her death
The form also allowed Mrs. Smith
to give the beneficiary the right to
withdraw immediately a percentage
of the account upon her death. Mrs.
Smith had set the percentage at
10% so each child in this case could
withdraw $33,333 immediately with
the remainder paid out over their
individual life expectancies. Each child
had to sign the form acknowledging
that they understood that they would
receive the account value in payments
spread out over their life expectancy.
Continued on reverse side ...
Used ANICO annuities that protected her savings
carried out her and her husband’s wishes to take care of their
children in their retirement.
Mrs. Smith also liked the various ANICO annuities that she
had placed her money in because they protected her money.
Mrs. Smith had also taken some of her personal savings and
purchased an American National Insurance Company Single
Premium Immediate Annuity to provide her the additional
income she needed over and above her social security and
minimum distributions from her IRA so she did not need to dip
into the retirement plan for more money. Mrs. Smith had the
cash flow she needed and she felt comfortable that she had
Financial comfort in knowing her children would
have money
Years of sacrifice to save money would benefit not only her but
her children and potentially her grandchildren as well. Consider
the American National Insurance Company’s Stretch IRA Concept
for your family.
Hypothetical Required Minimum Distributions
$300,000.00
$250,000.00
$200,000.00
$150,000.00
$100,000.00
$50,000.00
$11
20
13
20
15
20
17
20
19
20
21
20
23
20
25
20
27
20
29
20
31
20
33
20
35
20
Year of Distribution
37
20
39
20
41
20
43
20
45
20
47
20
49
20
For illustration purposes only; not to be relied upon.
Assumptions: Mrs. Smith, age 70 ½ passes away at age 82 and her children inherit her IRA
Annual Rate of Return:.................................................................................... 6%
Distributions taken beginning of year
Smallest amount taken that the law allows each year
Previous year end value is the account value as of 12/31 of proceeding year
Total Projected Distributions during Mrs. Smith’s Lifetime:.............................................. $623,700
Total Projected Distributions during Children’s Lifetimes:............................................. $3,096,732
Total Projected distributions:................................................................................ $3,720,432
This hypothetical illustration does not incorporate inflation into the computations, thus the impact of inflation on any value is not demonstrated.
This illustration assumes all IRA funds are pre-tax, and that there are no after-tax contributions. All projected figures assume the current
tax law and IRA rules remain constant throughout the illustration. The impact of future changes in the tax law and IRA rules may have
significant impact on the IRA balances, distributions and actual income taxes and estate taxes paid. This illustration assumes that the annual
rate of return will be constant over a long period of time. The use of alternative assumptions would produce significantly different results.
Contracts are issued by American National Insurance Company
The Stretch IRA concept assumes the annuity contract has value to support withdrawals. A Stretch IRA is a tax- deferral concept using
an annuity. A stretch concept is designed for individuals who will not need the money in retirement.
Withdrawals may be subject to Federal/State income tax, and if taken prior to age 59 ½, an additional 10% IRS penalty may apply. Neither
American National nor its agents provide legal or tax advice. Clients should contact their attorney or tax advisor for their specific situation.
Individual Retirement Accounts and other qualified plans already provide tax deferral like that provided by an annuity. Additional
features and benefits are contained with an annuity for a cost. Please be sure the features and costs of the annuity are right for you
when considering the purchase of an annuity.
Form 10396-CAS
American National Insurance Company
One Moody Plaza, Galveston, Texas 77550-7999
03/11