How RMDs are affected by the CARES Act for 2020
The U.S. Government has been putting trillions of dollars into the market place and consumer’s hands in order to tide the effects the Corona Virus lockdown is having on our economy.
As part of the Cares Act the Internal Revenue Code has been amended to suspend Required Minimum Distributions from retirement accounts for 2020. This applies to Traditional IRAs, SEP IRAs, 401ks, 403bs, 457(b) plans, as well as SIMPLE IRAs.
The suspension of 2020 RMDs does not prevent investors from taking retirement distributions from their retirement accounts, meaning voluntary withdraws are allowed.
Why would I want to suspend my RMD?
The two biggest advantages to skipping your RMD in 2020 has to do with investing and taxes. From an investment perspective skipping your RMD allows you as the investor to keep your funds invested longer with the opportunity to earn a greater return on your money, in addition to preventing investors from being forced to sell their investments at low valuations.
The second advantage to not taking RMDs in 2020 is the postponement of paying taxes on those RMD distributions. In general, the reason we have RMDs is to prevent taxpayers from never paying taxes on their retirement funds. The suspension of 2020 RMDs allows you to postpone that tax payment one more year.
If you have further questions on the changes to RMDS in 2020 or need help with retirement planning and investing reach out to Eric at https://www.schrumpw.com/contact-us/