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Retirement

2020 RMDs Waived by Stimulus Bill

  • Required minimum distributions (RMDs) are waived for 2020 
  • Savings can remain invested, potentially reducing the income tax burden 
  • Account holders still have the option to take distributions 

 

The recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act, includes a waiver for required minimum distributions (RMDs), creating an opportunity for many retirees to reduce their tax bill.

The RMD waiver applies to IRAs and defined contribution employer's savings plans. For retirees who can afford to skip their 2020 RMD, this means their retirement savings can be left to grow for an additional year. The waiver also applies to inherited IRAs, so children, grandchildren, and other beneficiaries can choose to not take a distribution this year. Those who don't want to take an RMD should cancel any automatic distributions for 2020.

This may come as welcome news for many retirees. RMD amounts are based on account value as of December 31, 2019, when markets were approaching historically high levels. RMDs are treated as taxable income, so the "RMD holiday" allows retirees to avoid a potentially higher 2020 tax bill. 

The recently passed SECURE Act raised the age that individuals would have to take their first RMD from 70 ½ to 72 beginning in 2020. Americans who turned 70 ½ in 2019 would have still been subject to the old rule and would have needed to make their 2019 distribution by April 1, 2020.* However, with the RMD waiver, any first-time RMDs that have not yet been made can also be waived until next year. Any 2019 RMDs made last year can't be undone.

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