Trained as an attorney and accountant, I use independent, objective research and don’t rely on rules of thumb, conventional wisdom, or biased research. The amount of the RMD each year is based on the account owner’s life expectancy as determined by tables issued by the IRS. Or they can take distributions from the IRAs before they are required to and pay the taxes at today’s rates. For those who were aware of the SECURE Act, the largest change it made with regards to RMDs was replace the lifetime stretch provisions for many beneficiaries of inherited IRAs and 401(k)s with a 10-year distribution rule. So, if you turn 70½ … Someone could take out a Coronavirus-related distribution in 2020 of up to $100,000 and repay it in the next three years. With many Americans struggling in 2020 because of the pandemic, having more flexibility on distributions can be beneficial. In the proposed regulations it was anticipated that the final regulations would take effect for tax years after 2020. You have 60 days from March 1, 2020, to roll over $15,000 into an IRA. I discussed in more detail the problems with RMDs and the strategies to avoid them when the proposed regulations were issued. In addition to the relief these RMD provisions provide, it also opens up some planning opportunities. When the proposed regulations were issued, the IRS estimated that the new tables would cause only a 1% increase in an IRA balance at age 90. Since, there are no RMDs owed in 2020, this would now be eligible to be rolled over, too, whereas without the RMD waiver that amount would not be eligible for a rollover. The bill stated that defined contribution plans, like 401(k)s, 403(b)s, 457(b) plans, and IRAs, may suspend RMDs in 2020. By default, the taxable distribution is spread out over three years, but can be treated as taxable income in 2020 if desired. Why does skipping RMDs in 2020 matter? The CARES Act does not directly impact these accounts. I’ve written about, and published, a variety of articles on retirement. WASHINGTON — The Internal Revenue Service today announced that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020. If you meet the requirements, it seems like most distributions in 2020 up to $100,000 can be repaid over the next three years if the owner was impacted by COVID-19. However, one strategy that can be used is if someone took an RMD from an IRA or 401(k) within the last 60 days, they can do a 60-day rollover to an IRA and not have it treated as a taxable distribution in 2020. They should be able to do a rollover in most cases if it is direct from the 401(k) to the IRA or if they use their “once every 12 months 60-day IRA rollover.”. They can convert a traditional IRA to a Roth IRA. It is important to remember this is just one set of provisions in an otherwise gigantic relief package totaling over $2 trillion. So, the tax problems of RMDs can increase over time. This new provision is not tied directly to RMD rules, but it does allow the individual to repay the amount as a qualified rollover contribution, beginning on the day after receipt of a coronavirus-related distribution. The IRS issued the final version of the regulations recently. Additionally, markets have been very volatile, and suspending RMDs gives many Americans the ability to leave their investment portfolios alone to recover over the next year. The beneficiary has until the end of the 10th year to withdraw the entire account. This group usually gets less favorable RMD rules than other beneficiaries, so we can expect that inherited RMDs across the board are pushed off for 2020. They allow someone at age 70.5 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. EY & Citi On The Importance Of Resilience And Innovation, Impact 50: Investors Seeking Profit — And Pushing For Change, Michigan Economic Development Corporation BrandVoice, when the proposed regulations were issued.