When it comes to required minimum retirement account distributions (RMDs), the government giveth, and now giveth again.
Earlier in the year, due to congressional approval of the Secure Act created for older Americans, the RMDs from retirement accounts are underwent a bit of a makeover. The updated life expectancy tables, which were proposed by the IRS for 2021, adjusted how you calculate those RMDs and there are two main benefits to consider.
After 2019 the mandated annual withdrawals from your retirement accounts will begin once you reach 72, as opposed to the former 70 and a half years of age. While that age delay is a small thing, it is still helpful to those wishing to maintain account balances and defer taxes.
The second benefit of the updated longer life expectancy calculations is that they work to make the minimum amount you have to take a little smaller. While it is true that most account holders take more than required, the IRS estimates that just 20.5% of those age 70 and older are expected to take only the minimum in 2021. Now the government has come along to bring further financial relief to those minimum minded retirees by waiving all required minimum distributions due in 2020.
Normally, there is a consequence if you do not take any distributions, or if the distributions are not large enough, but the Coronavirus Aid, Relief and Economic Security (CARES) Act changes this for 2020. By not taking a RMD, you can reduce your 2020 tax bill.
Anyone with an RMD due in 2020 from a company plan, such as a 401(k), 403(b), IRA, or other defined contribution plan, is eligible. Unfortunately, if you already took an RMD for 2020, you may be out of luck because there are generally no give backs.
The Czar Beer team is dedicated to providing timely, accurate information on all aspects of the CARES Act and the current economic crisis that affect our clients. However, as this is all developing quickly we are here to offer support in any way we can. You can email us at firstname.lastname@example.org or call 212 397 2970 with any questions you may have.