August 10, 2001 – in the section of its web site labeled “Investor Alerts” the NASD has issued a warning regarding so called “stretch IRAs”. A stretch IRA stretches the period of tax deferred earnings of assets within an IRA beyond the lifetime of the person who set up the IRA, typically over multiple generations. In other words, they would allow you to pass your IRA down several generations to your grandchildren. Because there is so much time for the investments in the IRAs to grow at a compounded, tax-deferred rate, the potential payouts are sometimes portrayed to be multimillion dollar amounts.
The NASD is concerned because the assumptions underlying a stretch IRA often include 90 year growth periods, as well as assumptions that the funds will never be needed, beneficiaries live normal life spans, no inflation, etc.
The NASD Release is available online at http://www.nasdr.com/alert_07-01.htm
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