IRS: Seniors, retirees not required to take distributions from retirement accounts this year under new law

The Internal Revenue Service today reminds seniors and retirees that they are not required to take money out of their IRAs and workplace retirement plans this year.

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, waives required minimum distributions during 2020 for IRAs and retirement plans, including beneficiaries with inherited accounts. This waiver includes RMDs for individuals who turned age 70 ½ in 2019 and took their first RMD in 2020. Roth IRAs do not require withdrawals until after the death of the owner.

What if I already took my RMD?
If an individual has already taken an RMD in 2020, including someone who turned 70 ½ during 2019, the individual will have the option of returning the distribution to their account or other qualified plan.

Since the RMD rule is suspended, RMDs taken in 2020 are considered eligible for rollover. Therefore, RMDs can be rolled over to another IRA, another qualified retirement plan, or returned to the original plan.

An IRA owner or beneficiary who has already received an RMD in 2020 can also repay the distribution to the distributing IRA no later than Aug. 31, 2020, to avoid paying taxes on that distribution.

IRS Notice 2020-51 (PDF) also provides that the one rollover per 12-month period limitation and the restriction on rollovers to inherited IRAs do not apply to this repayment.

The CARES Act provisions apply to most retirement plans, including traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, 457(b) plans, profit sharing plans and other defined contribution plans. The RMD suspension does not apply to qualified defined benefit plans….(read more)

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The Internal Revenue Service (IRS) has announced that seniors and retirees will not be required to take mandatory distributions from their retirement accounts this year. This move comes in response to the economic challenges posed by the COVID-19 pandemic, which has caused financial hardships for many individuals, particularly those in higher-risk age groups.

Typically, individuals who are 72 or older are required to take annual distributions from their traditional Individual Retirement Accounts (IRAs) and 401(k) plans. These required minimum distributions (RMDs) are calculated based on the account balance and life expectancy of the account holder. However, as a result of the CARES Act passed in response to the pandemic, RMDs have been waived for 2020.

This temporary relief measure provides seniors and retirees with the flexibility to leave funds in their retirement accounts without facing tax penalties for missing a distribution. This can be particularly beneficial for those who have seen a decrease in the value of their retirement accounts due to market volatility during the pandemic.

For individuals who have already taken a distribution in 2020 but do not need the funds, there is an option to return the distribution to their retirement account. The IRS recently extended the deadline for rollover contributions to retirement accounts from 60 days to August 31, 2020, providing additional flexibility for those who wish to undo a distribution that is no longer necessary.

Seniors and retirees who have questions about their RMDs or other tax-related issues are encouraged to consult with a financial advisor or tax professional. It is important to stay informed about changes in tax laws and regulations, especially during times of economic uncertainty.

Overall, the IRS’s decision to waive RMDs for 2020 provides much-needed relief for seniors and retirees who may be facing financial challenges in the wake of the pandemic. By taking advantage of this temporary measure, individuals can better manage their retirement savings and plan for the future with greater flexibility and peace of mind.