It’s Time to Start Taking Your Required Minimum Distributions Again

Under normal circumstances, if you had a traditional IRA or tax-deferred retirement plan account, you had to take required minimum distributions at a certain age so that you didn’t pay a penalty.

But because of the CARES Act, in response to the COVID-19 pandemic, you could skip those withdrawals in 2020.

But it’s 2021 now, so you’ll need to start taking your RMDs again.

RMD Refresher

After you turn 72 — or 70½ before 2020 — you have to start takings RMDs from your traditional IRAs and certain retirement accounts, like your 401(k).

RMDs are calculated based on life-expectancy tables. You have to withdrawal the minimum amount every year, though you can always take more than that required amount.

If you don’t take the minimum, you might have to pay a 50% tax on the amount you should have withdrawn. (Note: Roth IRAs don’t require withdrawals until the owner of the Roth dies.)

When you’re planning for your distributions, you usually have two goals:

• Meet your income needs for the year.
• Maximize the benefits of your IRA as long as you can for you and your beneficiaries.

Start Taking Your RMDs Again
When the CARES Act suspended RMDs for 2020, that meant taxpayers could keep their retirement accounts growing while deferring taxes on them.

The Consolidated Appropriations Act that went into effect in late December of 2020 didn’t extend the RMD deferment. So, you’ll need to start taking your RMD again so that you don’t face any penalties.

The IRS may waive all or a portion of the penalty if you can prove you didn’t take your RMDs because of a justifiable error and that you’re working to make up the shortfall. You’d need to provide the IRS with information and wait to see if they’ll grant your waiver. Just be aware that they might decide not to waive the penalty.

If you have questions about your RMDs — or anything else related to your retirement — let us know.

This communication is intended to provide general information as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.