Breaking News: IRA Withdrawals Are OPTIONAL For 2020

The CARES Act, implemented to deal with the COVID-19 crisis, has led to extra “stay at home” time for families

We’re calling clients to get the word out.

Required Minimum Distributions (RMDs), those IRA and retirement withdrawals you’re required to take once you turn age 72 (formerly 70½), are now optional for 2020.

It’s the government’s way of letting your IRA and retirement accounts recover and catch their breath from the COVID-19 crisis.

We discussed these changes in greater detail in a previous blog, but are touching base with clients by phone to review IRA withdrawals and update income strategies and financial plans in light of these 2020 changes.

Here’s some scenarios to consider for the remainder of 2020. Which one sounds like your situation?

Happy to forego withdrawals. If you don’t need to withdraw funds from your IRA to meet your spending needs, you might want to take advantage of the one-year RMD waiver and forego taking money out in 2020. The result? A lower tax bill. The less you take out, the lower your taxable  income. Easy peasy.

Ready to scale back. You do take money from your IRA every month, but the IRS makes you take out more than you really need to spend. The solution? Reduce your monthly withdrawals to fit your budget. Just let us know and we’ll make the change. Your tax bill will drop, and if you’re lucky, you might dodge those extra Medicare premiums higher income taxpayers get saddled with.

Counting on IRA income. You tap your IRA to meet your monthly spending needs and don’t plan on cutting back in 2020. No problem. As always, you’ll be taxed with the amount of your withdrawals, and won’t need to make any changes to your current withdrawal strategy.

You’re big on charitable gifts. You’ve been making charitable gifts from your IRA, using what’s called a Qualified Charitable Distribution (QCD). To recap, once you reach age 70½, you are eligible to gift up to $100,000 per year from your IRA to qualified charities. You might want to continue that practice for 2020, even though IRA withdrawals are not required. Why? Charitable distributions made from your personal accounts don’t generate any additional tax savings unless you itemize deductions. If you don’t itemize, you may be better off gifting to charity from your IRA, even in 2020.  Direct IRA gifts also help you avoid Medicare surcharges, and benefit your heirs by using up assets that come with a tax bill due.

Not sure what’s best for 2020? Give us a call and we’ll be happy to advise you based on your personal circumstances.

About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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