If you are currently receiving a Required Minimum Distribution (RMD) from your IRA – this article is for you!
As some of you know, The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law near the end of March 2020 and includes a provision to do away with the Required Minimum Distribution requirement for 2020 from both IRAs and Inherited IRAs. In other words, if you were required to take an RMD this year – you do not have to anymore.
The purpose of this article is to serve as a reminder that you have a decision to make – would you like to cancel your RMD in 2020 or not?
Some background and guidelines may be helpful when making your decision.
The RMD portion of the CARES Act was passed primarily because 2020 RMDs are calculated using account balances as of December 31st, 2019. The equity markets have gone down significantly since then, making the RMD requirement more burdensome than normal to meet. It is certainly not ideal, from a portfolio longevity standpoint, to take distributions when assets have gone down in value. Essentially the IRS recognizes this issue and is allowing an RMD reprieve to give account balances time to recover, which makes it easier for individuals to meet the RMD in subsequent years.
It may be more prudent to choose to cancel your RMD for 2020…
If your portfolio has suffered considerable loss and you identify with any of the three circumstances below:
- You were already planning on saving your RMD
- You do not need your RMD to pay for living expenses
- You were planning on using your RMD to live on, but believe you can do without this year
It may be more prudent to choose NOT to cancel your RMD for 2020 if…
- Your IRA portfolio has not suffered much loss and
- You have been using your RMD to pay for living expenses and you would like to stick with your plan
Keep in mind, you have the option to make this decision any time during 2020 (if you haven’t already done so), so let’s say you plan to receive your entire RMD in December, portfolio market values may be considerably different by then, so it may be prudent to make your decision later this year.
Also, if you would like to talk through your options, your financial advisor or CPA can serve as great resources to help you make the right decision. And, if you want your IRA to last as long as possible, this is a decision you will want to do right!
Written by: Joe Piscione
Joe Piscione is a CERTIFIED FINANCIAL PLANNER (CFP)™ and a Partner of The Helmstar Group in Boise Idaho. Joe and his wife, Emily, have three boys and one girl. They enjoy time together with each other, their grandparents, aunts, uncles, cousins and friends. Most activities usually revolve around a great meal and a celebration! They look forward to their annual trips to Payette Lake in McCall. Time at Disneyland, Hawaii, upstate New York and Lagoon has helped create some of the most enjoyable family memories in recent years.
Joseph M. Piscione | Partner | The Helmstar Group®
T 208.429.0800 | F 208.429.0801
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