COVID-19 Bill Eases Rules for Retirement Accounts.

The COVID-19 stimulus (CARES Act) signed by President Trump last week includes some important tax relief for older retirement account owners.

First, The required minimum distribution (RMD) rules for Individual Retirement Accounts and 401(k)s are waived for 2020. If you haven’t taken your RMDs for 2020 yet, or have some RMDs left to take, you can leave the money in the account. The waiver applies to inherited retirement accounts as well.

This could be a bigger benefit than one might think. A 2020 RMD is based upon the account’s value as of December 31, 2019. If the value of a retirement account took a nose dive, the 2020 RMD (based upon a pre-correction value) would take a larger percentage of the account’s current value than otherwise would have been taken but for the correction. This waiver will give one’s retirement account a chance to recover without having the depletion caused by a forced RMD.

In addition, the IRS has extended the tax-filing deadline for 2019 federal income tax returns from April 15 to July 15. The extension postpones the deadline for making a prior-year contribution (for 2019) to a traditional and Roth IRAs to July 15. Be sure to indicate to the IRA custodian that the amounts contributed before July 15, 2020, are a 2019 prior-year contribution.

The CARES Act also waives the 10% pre-age 591/2 early distribution penalty on distribution of up $100,000 from IRAs and other retirement plans for individuals who meet the requirements of being affected by the coronavirus. Income taxes would still be due on pre-tax distributions, but could be spread evenly over three years, and the funds could be repaid anytime during the three years. Finally, rules for plan loans are relaxed for those who meet the definition of being affected by the coronavirus. Loan limits are increased and repayments postponed.

If you need assistance with your financial or retirement planning, give me a call, I can help.

Stay safe; wash your hands frequently!