Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March 27, 2020.
Section 2203 of the CARES Act provides a waiver of the required minimum distribution requirements for 401ks, 403(b)s, IRAs, and Inherited IRAs.
General Rule for 401ks, Traditional IRAs:
Under the new SECURE act, if you are the primary owner of a 401k or Traditional IRA (you are the one making contributions to the IRA), then you are not required to take annual required minimum distributions (RMDs) for your IRA until you are age 72.
The amount of your RMD is determined based on the value of your IRA at the end of the prior year (December 31) and a withdrawal factor based on your age. The table is in IRS Publication 590-B. The withdrawal factor increases with age.
What About Roth IRAs?
Roth IRAs that are owned by you (you are the one who made contributions to fund the IRA) do not have RMDs during your lifetime.
What About Inherited IRAs?
Inherited IRAs have annual required minimum distributions (RMDs) regardless of the age of the person who inherited the IRA. As with the original IRA owner, the RMD factor is based on the age of the person inheriting the IRA.
Can I Still Take A Withdrawal from My IRA?
Yes. The CARES Act removes the mandatory element of an IRA withdrawal during 2020. You can still take an IRA withdrawal in 2020.
Can I Still Make a Qualified Charitable Distribution to Charity From My IRA?
Yes. If you regularly make qualified charitable distributions (QCDs) from your IRA to a charity nothing in the CARES Act prevents that.
If you are charitably inclined, qualified charitable contributions (QCDs) from your IRA typically leads to a better tax result because QCDs are deducted “above the line” which means you get the tax benefit of the contribution whether or not you have enough other deductions to qualify for itemized deductions.
Be sure to coordinate with your tax planner and IRA custodian to ensure that the contribution is a direct transfer from the IRA custodian to the charity.
And As Long As You Are Reading About IRAs!
This is a good time to verify that the beneficiary designations on your retirement accounts say what you expect them to say, particularly if you have not reviewed them lately!
Remember, retirement account custodians will distribute your retirement accounts according to the beneficiary designation instructions they have on file so we want those beneficiary designation instructions to coordinate with your Will / Trust.
If you have questions about your RMDs for 2020, please feel free to give our office a call!