How to Handle Your Required Minimum IRA Distribution During COVID

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Earlier this year, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted by Congress to mitigate economic damage due to COVID, temporarily modified rules related to retirement accounts. Specifically, the CARES Act suspended the annual required minimum distribution (“RMD”). RMDs generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 72 (70 ½ if you reach 70 ½ before January 1, 2020), if later, the year in which he or she retires. The suspension of RMDs applies to defined contribution plans (e.g. IRAs, 401(k)s, 403(b)), and the inherited versions of those accounts.

Taxpayers who took their RMD earlier in the year, prior to the passage of the CARES Act, have until August 31, 2020 to rollover the RMD to another retirement account. This rollover does not count against your annual limit of one IRA to IRA rollover or implicate the restrictions on rolling over an inherited IRA.

If you have not taken your RMD for 2020 and do not need to take it, make sure you suspend or cancel the distribution for the year. Keep in mind that with the passing of the Setting Every Community Up for Retirement Enhancement (SECURE) Act this past December the age at which you must take your first RMD raised from 70 ½  to 72 years old.

If you took an RMD (or monthly RMDs) from your retirement account and want to look into returning it, or if you are considering not taking your RMD for 2020, reach out to your advisor or the custodian of your retirement account for guidance.