In response to the coronavirus (COVID-19) pandemic, lawmakers have passed a bill titled The Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 28, 2020, in an effort to reduce the economic and health related impact of the virus.
Included in the law are a few temporary adjustments to IRAs and retirement plans. Most notably:
Required Minimum Distributions (RMDs) are suspended for 2020
For individuals who have not taken their RMD for 2020, you are not required to do so. Before year-end, we encourage you to have a discussion with us on what strategy is most appropriate given your income level, liquidity needs, and tax circumstance. Potential options include:
|Do Nothing||Lower 2020 taxable income|
|Withdraw +/- IRA RMD||Realize 2020 taxable income at your discretion|
|Convert +/- IRA RMD to Roth IRA||Create both 2020 taxable income and future tax-free income source|
|Charitable gifts from IRA||Cash flows tax-efficiently realign due to qualified charitable distribution|
Each client circumstance is unique, therefore no one-size-fits-all solution applies here. Only through a strategic discussion can we determine which of these options is most appropriate for you.
For individuals who have already taken their RMD, you will include the distribution in your gross income and pay tax on it as originally expected. However, there is a 60-day window to return the distribution to your Traditional IRA or convert the distribution to a Roth IRA.
We encourage you to contact our office as soon as feasible and schedule an appointment to talk through this temporary RMD suspension with your Financial Advisor.