Due to the COVID-19 pandemic, the stock market dropped significantly causing many to lose significant savings set aside for retirement. Federal law typically requires those age 70 ½ to take annual required minimum distributions (RMDs) from the following types of retirement accounts:
- Profit sharing plans
- 401(k) plans
- 403(b) plans
- 457(b) plans
- Traditional IRAs (including SEPs, SARSEPs, and SIMPLE IRAs)
- Roth 401(k).
The Coronavirus Aid, Relief and Economic Security (CARES) Act waives the requirement that individuals take RMDs from their non-Roth IRAs and 401(k)s in 2020.The amount of the RMD would have been based on the balance of the account at the end of 2019. Since this is likely much higher than the current balance, it would impose financial hardship on many retirees to require the distribution given the current state of the economy. Waiving this requirement will allow retirees to retain more of their savings and hopefully provide some peace of mind.
Obviously, if any individual needs the distribution for any reason, they may choose to take it. There could be situations where it would be more beneficial to take the RMD rather than the waiver. For example, those who know they will be pushed into a higher tax bracket the following year will benefit from taking the distribution in 2020 rather than allowing it to remain in the retirement account. To determine how RMDs fit into the larger picture of your retirement planning, contact Stouffer Legal at 443-470-3599 in the Greater Baltimore area for a consultation.