New rules for required minimum distributions

The amount of time banks and other financial institutions have to notify people with retirement accounts about new rules for taking required minimum distributions (RMDs) has been extended.
Under IRS Notice 2020-06, financial institutions have until April 15 to notify certain people with retirement accounts that no RMD is due for 2020. The new rule was recently enacted under the SECURE Act, increasing the age for RMDs from 70 1/2 to 72.

Before passage of the SECURE Act, financial institutions had until Jan. 31 to inform IRA owners who would turn 70 1/2 in 2020 about the RMD for this year.

For institutions that sent letters to IRA owners with incorrect information, corrected letters must be sent by April 15.

The relief was necessary for institutions that did not have enough time to change their systems after the SECURE Act went into effect at the end of 2019. RMDs are important to know if you’re over 70, or if you manage the finances of a family member who is, because you must take the required payout on the timeline set out by the IRS or face a penalty equal to 50 percent of the amount you were supposed to take out.

Typically, plan administrators send reminders to IRA owners in January. Under the SECURE Act, the new beginning date for an IRA owner to take an RMD is April 1 of the calendar year that follows the calendar year in which the individual turned 72, rather than 70 1/2.

When did you turn 70½?

In 2019

If you have not taken an RMD for 2019:
You must take your 2019 RMD by April 1. The amount you are required to take depends on your account balance as of Dec. 31, 2018. In addition, you are required to take an RMD for 2020 by Dec. 31. The amount of that RMD is based on your retirement account balance as of Dec. 31.

 

In 2020

You have no RMD for 2020 and do not need to take any action.

If you already took my RMD for 2020, either in total or in part:
As of December 2019, the IRS and the Treasury Department were still evaluating what to do in this situation. Contact your estate planning lawyer for the latest updates.

More News

Step-up in basis at death might go away

The Sensible Taxation and Equity Promotion (STEP) Act would get rid of what’s known as the step-up in basis to tax the unrealized gains of certain estates at death.

Step-up in basis refers to the way the value of an asset is readjusted for tax purposes upon inheritance.

Read Article

SECURE Act 2.0 could change retirement

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, which passed in late 2019, was only the start of changes for the retirement industry. A bipartisan bill, which has been nicknamed “SECURE Act 2.0,” is in the works.

Read Article

Collecting Social Security while working

For people who want to work while collecting Social Security, the “retirement earnings test” (RET) rules can be confusing. Some people think they’ll lose out on benefits if they continue to work, but that’s not true.

Read Article

Estate planning tips for unmarried couples

If you are in a committed relationship but are not married to your partner, estate planning is essential. Unless you each draft a will and designate the other person as a beneficiary, your assets will pass to other family members and your partner will receive nothing when you die. Further, without proper planning you won’t

Read Article