DEFINITION of 'Extended IRA'

An IRA that allows a second generation beneficiary to continue to distribute the assets over the life expectancy used by the first generation beneficiary, thereby extending the IRA.

BREAKING DOWN 'Extended IRA'

An individual who inherits IRA assets from the original IRA owner is referred to as the first generation beneficiary. This individual is able to distribute the assets over his or her life expectancy or the remaining life expectancy of the IRA owner. If the first generation beneficiary subsequently dies, his or her designated beneficiary is the second generation beneficiary. This type of IRA is used by those who no longer need - or want - to spend all of their IRA assets at the same time. Extended IRAs can have extensive tax benefits because second generation beneficiaries are allowed to continue distributions over the life expectancy used by the first generation beneficiary, thereby spreading the tax burden from distributions over a long period.

RELATED TERMS
  1. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  2. Inherited IRA

    An individual retirement account that is left to a beneficiary ...
  3. Primary Beneficiary

    A beneficiary in a will, trust or insurance policy that is first ...
  4. Named Beneficiary

    This term refers to any beneficiary named in a will, a trust, ...
  5. IRA Asset Will

    A document that specifies how the assets in an individual retirement ...
  6. Absolute Beneficiary

    A designation of a beneficiary that can not be changed without ...
Related Articles
  1. Financial Advisor

    Why You Need to Find the Right IRA Beneficiary

    It definitely matters who you pick as your IRA beneficiary—and how you go about it. And in some cases, your best option may be to go with a trust.
  2. Retirement

    Breaking Down IRA Beneficiaries: Part 1

    It's important to give serious consideration to your IRA beneficiary designations.
  3. Retirement

    Designating A Trust As Retirement Beneficiary

    Designating a trust as your IRA beneficiary can be beneficial, but it requires proper planning to avoid problems.
  4. Retirement

    What You Should Know About IRA Beneficiaries: Part 2

    Here's how IRAs, and the beneficiaries you name, work with wills and trusts.
  5. Managing Wealth

    Managing Inherited IRAs: Distributions and Taxes

    If you have inherited an IRA account you don’t need to turn it over to the estate, regardless of what the will says.
  6. Retirement

    Want To Leave Money To Your Family? Stretch Your IRA

    Find out how your beneficiaries can enjoy tax-deferred growth for as long as possible.
  7. Retirement

    Mistakes in Designating a Retirement Beneficiary

    Make sure your beneficiary designations not only reflect your intentions but also meet the requirements to be effective.
  8. Retirement

    3 Deadlines For Retirement Plan Beneficiaries

    To take full advantage of new RMD regulations, beneficiaries need to take action before important deadlines.
  9. Retirement

    Why Your Estate Shouldn't Be Your IRA Beneficiary

    Here are five reasons why you should not name your estate as your IRA beneficiary.
  10. Retirement

    11 Things You May Not Know About Your IRA

    These little-known features will help you get the most out of your retirement savings.
RELATED FAQS
  1. Can the non-spouse beneficiary of an IRA name a successor beneficiary?

    Whether the beneficiary of an individual retirement account (IRA) can name a successor beneficiary (second generation beneficiary) ... Read Answer >>
  2. Upon my death, will the beneficiaries of my IRA be compelled to take the entire amount ...

    It depends. If the beneficiary of your IRA is your spouse, he or she will be eligible to transfer the amount to his or her ... Read Answer >>
Hot Definitions
  1. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  2. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  3. Mezzanine Financing

    A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing ...
  4. Long Run

    A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all ...
  5. Quasi Contract

    A legal agreement created by the courts between two parties who did not have a previous obligation to each other. A normal ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center