The Coronavirus Aid, Relief and Economic Security Act (Cares Act) just passed by the House of Representatives gives you the option of not taking your required minimum distribution (RMD) for 2020.

RMD background

Typically you have to take your first RMD by April 1st of the year you turn 70 ½, as we have covered in our blog, Happy 70 1/2 Birthday! Your First RMD is Due April 1st, 2020. The Secure Act recently raised the age for RMD to 72, as reflected in our blog, SECURE Act Changes Rules for RMDs but if you turned 70 1/2 in 2019 and have not yet taken your RMD, you were to do so within the next three weeks.

What does the CARES Act change?

Under the CARES Act, RMDs are waived for IRA owners who turned 701/2 in 2019 and who were planning on taking their distribution by April 1, 2020. If you are in this situation, there is a double benefit. Not only do you not need to take your 2019 RMD in 2020, you do not have to take your 2020 distribution in 2020!

For those already taking RMDs annually, you are not required to take a distribution for 2020. If it’s on auto pay with your broker, it may make sense to stop it.

Keep in mind that your RMD distribution for 2020 is based on the value in your retirement accounts as of December 31, 2019, when the Dow was at 28,000. The delaying of 2020 distributions gives your retirement portfolio a chance to recover

Two caveats - in connection with your 2020 estimated tax payments, if you are not taking your 2020 RMD, you may need to reduce your quarterly payments. Also, if you had taxes withheld on your RMD, and you do not take it for 2020, you may have to increase your 2020 quarterly estimated tax payments!

Before you decide not to take your 2020 RMD, give us a call and we can guide you through the options.

Be safe, be well. We’re here for you. Visit our Coronavirus Resource Center for mo