fbpx
Schedule a no-obligation appointment by calling (602) 242-4000

Rethinking Required Minimum Distributions in 2020

Last week President Trump signed into law the bipartisan COVID-19 stimulus bill. One of the facets of the bill includes welcome tax relief for retirees. The required minimum distribution (RMD) rules for IRAs and 401(k)s are waived for 2020. This means that you don’t have to take money out this year and can keep it invested. This also applies to 403(b) accounts, SIMPLE IRAs, SEP IRAs and BDAs.

In 2009, during the Great Recession, this was also done to provide tax relief for retirees.

Those who rely on this income for living expenses may go ahead and take their RMDs if they desire. But if this income isn’t needed, you may want to call our office or check with your tax professional to look at your best strategy.

If you don’t want to take your RMD this year, be sure to cancel any automatic distributions you have set up.

Quick summary about the provision:

  • This relief ultimately will reduce owner’s 2020 tax bill.
  • Anyone with an RMD due in 2020 from a company plan: 401k, 403b, or an IRA & BDA is not required to take a distribution this year.
  • Since RMDs are calculated using values from 12/31/2019 when the Dow was 28,462 compared to where it is today, owners would likely have to withdraw a greater percentage of the account and pay a big tax bill on a value that no longer exists.
  • Retirees can still withdraw any amount if they would like.
  • Even though RMDs are waived this year, clients can still use an IRA for a Qualified Charitable Distribution (QCD).
  • Minimum age for a QCD is still 70 ½.

Please call our office if you would like to waive your RMD for this year or have questions regarding how it applies to your situation.