Welcome to the Providence Wills and Trusts Stretch Calculator!

 

The Stretch is an estate planning technique that will help provide for your kids’ or grandkids’ retirement. It works by allowing your beneficiaries to “stretch” inherited retirement accounts over their entire lifetimes instead of using the default rule that normally requires the accounts to be emptied out (and taxed!) within five years of death. They will enjoy tax-deferred growth, decade after decade, for life. It really adds up!

 

The Stretch Calculator shows you just how powerful The Stretch would be in your situation. Simply enter your beneficiary’s age, the expected value of your retirement accounts at death, and an estimated average rate of return on the invested assets. The calculator will show you several important data points, including the total amounts that will be distributed over the beneficiary’s lifetime, the annual distributions the beneficiary will receive each year, and the annual account balance.

 

You are free to experiment with any numbers you choose, but we do have the following tips that will help you get the most out of this powerful tool:

 

• Disregard your spouse as a beneficiary. Spouses benefit from special rules that are even better than The Stretch. The Stretch will apply to your kids, grandkids, or other nonspouse beneficiaries.

• When choosing the “Starting Principal”, you can enter the sum of all of your qualified retirement plans. These include IRA, 401(k), 403(b), 457(b), defined benefit plans (pensions) that pay lump sum benefits, employee stock ownership plans (ESOP), profit-sharing plans, and money purchase plans.

• If you have multiple beneficiaries in mind, divide your “Starting Principal” among them and run a separate calculation using each beneficiary’s age. For example, if you have two kids aged 25 and 28, and a starting principal of $200,000, calculate the stretch using $100,000 with an age of 25 and again using $100,000 with an age of 28.

• When choosing beneficiary ages, plan for the expected but anticipate the unexpected too. If you expect to live to age 80, run the numbers and see the results. But we always encourage our clients to ask, “What if something happens to me tomorrow?” You should always run a scenario with your beneficiaries’ current ages so you’ll be prepared for the unexpected.

• When running numbers that assume you will live a long time, make sure your “Starting Principal” reflects the additional contributions you will make and the growth you will see between now and then. It should also reflect your expected withdrawals during retirement.
• Choose a reasonable rate of return. Experts differ on what rate of return you can expect, but 8% is a good middle ground to start with. Try 6% if you prefer safer investments. If you’re more aggressive, try the historic stock market average of 10%.

• To see the total lifetime value of your retirement accounts under The Stretch, look at last figure in the “Total Distributions” column (located in the upper-right portion of the calculator).

• If you have grandkids, try running the numbers using their ages. Prepare to be shocked!

 

Get our Free Guide, "How to Leave Behind Your Retirement Accounts—The Right Way!"  You'll learn all about The Stretch and will get answers to all of the questions you should be asking, including:

• What is the huge mistake most people make that jeopardizes The Stretch—and how do I avoid it?
• What are the major threats to The Stretch—and how do I protect against them?
• What happens to my retirement assets if a minor or special needs beneficiary inherits them?
• Why do the annual distributions start out so low?

Get "How to Leave Behind Your Retirement Accounts—The Right Way!"  now!  All you have to do is enter your first name and email address below.

 

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