Expanding RMD Waiver Relief for COVID-19
Take advantage of repaying your traditional IRA or 401(k) plan, and complete your rollover by August 31.
Earlier in the year, legislation passed in Congress to waive required minimum distributions (RMDs) from retirement savings accounts for 2020. The Coronavirus Aid, Relief, and Economic Security (CARES) Act contained retirement assistance to benefit individuals, businesses, and retirees. Typically, retirees over the age of 72 are required to take distributions from their traditional IRA or 401(k) accounts.
In light of COVID-19, retirees are able to take a step back from these requirements and focus on their personal health. The RMD waiver allows retirees to push their distributions to next year. Before this waiver, skipping or failing to take your RMD could potentially lead to a 50% tax penalty on the amount they should have taken out. However, now retirees can postpone their RMD until next year without penalty.
Did you already withdraw your annual RMD? No worries!
While some retirees have been able to avoid taking out their annual RMD, some individuals were not able to reap the benefits of the waiver. If you took out your RMD before the CARES Act, then you may have been stuck with your mandatory distribution. Previously, if you took out your RMD between February 1st, 2020 – May 15th, 2020 you could repay your retirement account by July 15, 2020.
The IRS has now expanded their COVID-19 relief to push the waiver even farther to include inherited IRAs. In addition, individuals who accessed their RMD before February 1st, 2020 are qualified to send money back to their accounts.
The new deadline for repaying distributed funds is August 31, 2020.
What are the benefits of repaying my RMD for 2020?
If you’re facing a financial hardship, it may be beneficial to keep your required minimum distribution this year. However, if you decide to send that money back to your retirement accounts, it will benefit you in the upcoming year.
Adding your RMD back to your traditional IRA or 401(k) account will help your funds grow for a longer period of time, and you will have less taxable income for 2020. Please consult with a Central Investment Advisor to learn more about required minimum distributions or retirement accounts.
The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its subsidiaries and does not imply endorsement or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.