The Fiscal Stimulus Package, or CARES Act, that Congress approved and the President signed on March 27th provides cash relief to many American homes. In addition to this, those who would have had to make Required Minimum Distributions (RMDs) this year, from their retirement plans and/or traditional individual retirement accounts (IRAs), no longer are required to. The SECURE Act, which passed at the end of 2019, had recently adjusted the age at which RMDs begin- from 70½ to 72. Any confusion around this change has been alleviated by waiving the requirement for this year. For those younger who still need to take these types of distributions from an inherited IRA, this waiver applies to you too.
If you already took your 2020 RMD, the newly enacted law provides some options:
-If the RMD was taken within the last 60 days, the money can be placed back into the IRA through an “indirect rollover.” If there were multiple distributions, however, the additional amounts can be deposited into a Roth IRA. This won’t wipe the tax liability, but at least the money can grow tax-free.
-If the RMD was taken more than 60 days ago, the CARES Act allows repayment to the IRA over the next three years. Basically, you’re allowed to put the money back in as long as it was taken for a coronavirus related hardship.
For the crowd under the age of 59½, a similar option is now available. You can take a penalty-free withdrawal so long as it is a coronavirus related hardship and it is repaid within 3 years. The SECURE Act also makes other penalty-free distributions available for those under 59½ – either to pay back student loans (up to $10,000) or to cover expenses from the birth (or adoption) of a new child (up to $5,000).
Until Next Time,
**Written by Benjamin Derge, Financial Planner. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.