Some Important Retirement Account News
With all that is going on, it is easy to let finances slip to the back of your mind. But, the CARES Act made some important changes to retirement accounts that we would like to make you aware of.
For those of you taking Required Minimum Distributions (RMDs):
Due to the CARES Act, no person needs to take RMDs from a traditional IRA, 401(k), etc. in the year 2020. This applies to those receiving distributions from inherited (beneficiary) IRAs, as well.
A recent June 23rd IRS announcement clarified one item. Anyone who has taken an IRA distribution already in 2020 and would like to put it back into their account, can do so without incurring taxes. Effectively, it would be as if this distribution never happened. This is allowable until August 31, 2020. If you have received IRA distributions in 2020 that you no longer want, it may be wise to place those funds back in your account to avoid taxation.
Of course, this must be balanced against your cash flow needs. In many cases, IRA distributions are used by retirees for their current living expenses. Choosing to simply ‘not take’ your distribution is not an option if you’re using it to pay your bills! If this is the scenario you find yourself in, it probably makes sense to continue taking your IRA distribution as planned.
While on the topic of IRAs…
Remember that the tax filing deadline has been extended to July 15th. With this, so has the IRA funding deadline for 2019 contributions. If you wish to fund an IRA for the 2019 tax year, you can deposit up to $6,000 under age 50, and an additional $1,000 if age 50 or above. There is no longer any age limit on depositing into an IRA.
We recognize that the CARES act RMD changes can be a bit confusing. If you’d like to discuss how these changes apply to your case specifically, please do not hesitate to reach out!