What you need to know:
The CARES Act waives all required minimum distributions (RMDs) from retirement accounts for 2020. This includes traditional IRAs, SEP IRAs, and SIMPLE IRAs, as well as 401(k), 403(b) and Governmental 457(b) plans. They do not need to be made up next year.
What does it mean?
This means that, as a retirement account owner or a beneficiary taking stretch distributions, you can leave your retirement accounts alone for another year, allowing your accounts the time to recover.
Additionally, if you are at least age 70 ½, the Qualified Charitable Distributions (QCDs) allow you to send up to $100,000 from an IRA to a qualified charity and have that amount offset any RMDs for the year and not be treated as a taxable distribution. Note: Since the required date for RMDs is 72, if you use a QCD at age 70 ½, you would not be able to offset any RMDs because none are owed yet.
What can you do?
- If you already took your RMD, it can be rolled over to an IRA or eligible retirement plan (unless you are a beneficiary who inherited the IRA). This is limited to one 60-day rollover per 12-month period.
- However, if you took your RMD in January, the IRS has stated that you cannot roll it back to a plan or an IRA, as the 60-day window has passed, and therefore, a January RMD would not be eligible for a rollover.
- If you took your RMD between Feb. 1 and May 15 you have until July 15 to roll it back.
- If you won’t need your RMDs, now is an ideal time to suspend your RMDs for 2020.
- If there’s an agreement or schedule established, you, as the beneficiary should notify the custodian that you don’t want to take the RMD this year. (It never hurts to notify the custodian of your intent, regardless of existing arrangements.)
This material was prepared by LPL Financial.
This information is not intended to be a substitute for specific individualized legal or tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.