Did you take a Required Minimum Distribution (RMD) This Year? If so, an Important Deadline is ApproachingSubmitted by Jodi Vleck , Beta Wealth Group on July 14th, 2020
- Who is Eligible: Anyone with Required Minimum Distributions (RMDs) from retirement accounts for 2020. Eligible retirement accounts include:
- Traditional IRAs.
- Inherited IRAs (Traditional and Roth).
- Planning Opportunity: This presents a greater opportunity for Roth IRA conversions in 2020 considering recent market volatility.
The deadline to recontribute to your retirement account is August 31, 2020.
The reason for this extraordinary waiver is the COVID-19 pandemic and subsequent market fallout. This is related to the CARES Act signed by President Trump in March which allows Americans in 2020 to skip taking out their required minimum distributions from their Individual Retirement Accounts because of the public health crisis. For more information on other provisions of the CARES Act, please see here.
Some may have taken their distributions before President Trump signed the legislation. While these distributions may be needed for day to expenses, recontributing would keep the money invested in your account for a subsequent market recovery and continued tax-deferred growth. RMDs are taxed as ordinary income, which means that the withdrawals will be added to your taxable income each year. Individuals who decide to return their RMD withdrawals can recontribute to the original account or another tax-deferred account.
The IRS announcement can also be beneficial to Americans who inherited an IRA or other retirement account and took an RMD this year. These individuals can also return the distribution.
Please contact us for guidance or any questions you may have.