We’ve written extensively on the impact of both the SECURE and CARES Acts and the subsequent waiver of 2020 Required Minimum Distributions (RMDs). This waiver has allowed individuals to keep their money in their tax-qualified plans, a respite from the market volatility surrounding COVID-19. We’ve also educated our clients on how to leverage this waiver to their advantage by either creating a ROTH IRA for the year or by using Whole Life Insurance to create a more lasting legacy that will save them and their beneficiaries money and taxation.
Although the CARES Act waived RMDs for 2020, many individuals had already taken their RMD earlier in the year. Despite the initial guidance allowing for a distribution to be rolled back into an IRA within 60 days, many individuals who were unaware missed the grace period. The issue is that many seniors take their RMDs on an automatic basis in early January and were therefore already disqualified from the RMD waiver provided by the CARES Act, signed on March 27th.
The IRS has now corrected this issue and will allow for any RMD to be reversed at any point before August 31st, 2020. The new guidance, Notice 2020-51, states that the funds that were distributed can, depending on the holding company’s rules, be reversed or simply “rolled” into a new IRA somewhere like an insurance company, bank, or brokerage house. This will keep those funds in your account for 2020 as well as reduce your tax burden at the end of the year based on your earned income.
Please contact Olympic Golden Retirements if you have received an RMD for 2020 and would like to have it reversed or rolled into a new plan.