Required Minimum Distributions (RMDs) Can Be Skipped in 2020

Required Minimum Distributions (RMDs) usually have to be taken each year from certain accounts such as IRAs, 401Ks, and other qualified retirement accounts by owners over age 70 1/2. Similarly RMDs have to be taken by account owners of inherited IRAs. Since RMDs have to be completed before of the year, some owners of these accounts may be wondering if they have to take it out before Dec 31st. Due to the pandemic, RMDs can be skipped this year. This relief was part of the The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed earlier this year.

Note: This post applies to US investors only

Below is an excerpt from an article at Schwab:

Hayden Adams, CPA, CFP®, and director of tax planning at SCFR, offers answers to some common questions retirees are asking about RMDs in light of the CARES Act:

1. Do retirees have to take RMDs from retirement accounts in 2020?

“No, all RMDs have been suspended for 2020,” says Hayden. This waiver includes any retirement account subject to RMDs, such as IRAs, 401(k)s, Roth 401(k)s and inherited accounts.

2. What age do I have to be in order to qualify for the waiver?

If you are subject to RMDs, the waiver applies to you regardless of age. It includes original account owners over age 70½ (or 72, under the SECURE Act), original account owners who turned 70½ in 2019 but have not taken their distribution yet, and inherited-IRA beneficiaries of any age (see number 3, below).

3. Does the waiver apply to inherited IRAs?

Yes. The waiver extends to inherited IRAs (including stretch IRAs), as Schwab interprets the law. Even inherited IRAs with non-spousal beneficiaries, which would normally need to be liquidated within 5 years of the original account-holder’s death, are not required to take a distribution in 2020. You should consult with your tax advisor, but Schwab’s interpretation is that beneficiaries have an extra year to fulfill the 5-year requirement, since RMDs can be skipped in 2020.

Source: Can You Forgo Taking RMDs in 2020?, Schwab

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