As a result of the pandemic, market fluctuations have been affecting retirement portfolios. This puts retirement account owners in a double dilemma—losing valuable assets and facing a responsibility they also have under Federal Law.

Individuals who are 70 and a half years old have to take Required Minimum Distributions (RMDs) from their retirement plan in April the year after they turned 70. If the individual is younger than 70 and a half years old at the end of 2019, then they are allowed to wait until they reach the age of 72 to take RMDs.

The value of their accounts at the end of 2019—when the stock market was at a high point and the account possibly had more money—is the basis of the amount of the RMD. However, the funds withdrawn are treated as taxable income this 2020 and can increase the amount of taxes owed.

In light of this, the Coronavirus Aid, Relief, and Economic Security Act (CARES) was legislated to help preserve retirement assets and stimulate the economy. Now, retirement account owners do not have to take mandatory withdrawals this year.

•  Benefits

Waiving RMDs will allow retirees to retain more of their savings, and leaving the money in the account will also allow the savings to continue to grow. You don’t have to worry a possible additional tax burden for this year. 
 

• Coverage

The RMD waiver is applicable to individuals taking RMDs from their own retirement accounts and for those who have inherited retirement accounts. Accounts covered are Traditional, SIMPLE and SEP IRAs.
 

• Redeposit / Rollover

In case you have already taken an RMD, you can redeposit it into the account where it was withdrawn from or it can be rolled-over to another retirement account within 60 days. Utilizing this 60-day roll-over can only be done once per year.

Need more guidance, or have questions? Koler Law Office focuses on asset protection planning, please don’t hesitate to reach out for a free consultation today.