I have important information to share from a webinar I recently attended, led by IRA expert, Ed Slott (IRAhelp.com). He shared valuable updates in regards to 2020 IRA and Company Retirement Plans.

Please view my quick notes below, and do not hesitate to email me with any questions. As your Financial Advisor, my goal is to keep you informed and be available as you have questions or need assistance.

The “Coronavirus Aid, Relief, and Economic Security Act,” or CARES includes special relief for IRA’s and Company Retirement Plans:

1) There are no Required Minimum Distributions (RMD’s) for the tax year 2020. This applies to all traditional IRA’s, Roth IRA’s, Inherited IRA’s and Work Plans. Defined benefit plans are not included in this exception.

2) You can rollback any Required Minimum Distribution you have already taken in 2020. However the rollover rules still apply. You must roll the distribution back to the IRA within 60 days of receiving the money and you can only do this once per year.

3) You cannot rollback Inherited IRA distributions previously taken.

4) You are able to convert Traditional IRA’s to Roth IRA’s without taking the Required Minimum Distribution first. This is a great opportunity because your “RMD” monies can now go to the Roth IRA instead of a non-qualified or taxable account. However, you still need to be prepared to pay tax on any Roth IRA conversions.

5) Qualified Charitable Distributions (QCD’s) are still available. These are available for clients age 70.5 or older. These offer a great way to donate IRA dollars to charity while saving tax.

6) If you have an established IRA distribution via rule 72(t), you will continue your distribution without disruption. This type of distribution has not been waived for 2020.

7) And last, but not least! Please do not confuse these CARES ACT rules with the “Coronavirus-Related Distribution” Rules (CRD’s). The CRD’s afford “affected” individuals the opportunity to withdraw dollars from their traditional IRA or employer plans without penalty.

An “affected” individual is:

  • diagnosed with COVID virus by a test approved by the CDC
  • individuals whose spouse or dependent is diagnosed
  • individuals who experience “adverse financial consequences” on account of:
    • being quarantined
    • being furloughed or laid offer having work hours reduced
    • being unable to work due to lack of child care or
    • closing or reducing hours of a business owned or operated by the individual

If you qualify, you can withdraw up to $100,000 from your IRA or company plan without paying the 10% early distribution penalty. In addition, you can pay the balance back to the IRA or plan tax-free within three years of when the money was received. If you keep the dollars and pay the tax, the CARES ACT allows you to pay the tax over a three year period.

 

Update by Greg Storen, MBA – Financial Advisor, Senior Tax Professional

Learn more about Greg and the rest of the Storen Financial team here.