Required Minimum Distributions in 2020 (Article)


Required Minimum Distributions in 2020

Along with everything else in 2020, Required Minimum Distributions (RMDs) are messy this year.  With both the Secure Act and CARES Act, there were several changes. To begin, the SECURE Act (signed into law in December 2019) pushed the starting age back from 70.5 to 72.  If you turned 70.5 in 2019, you were still required to take your first RMD by April 1st of 2020.  If you turned 70.5 in 2020 or later, you fall under the new age 72 rules.  Then in March 2020, the CARES Act was signed into law and all 2020 RMDs were waived.

Sufficiently confused? No need to worry!  Your retirement plan recordkeeper or provider is on top of this and will reach out to you in accordance with all the new legislation!  Just make sure that if RMDs apply/applied to you this year or next you’re keeping your eyes peeled for information.  And if you were worried about them this year, you can breathe a sigh of relief!

What happens if you don’t take your RMD on time or take the wrong amount?  Well, let’s just say that you want to avoid this scenario.  In short, there are additional tax penalties that apply.

How Do RMDs Actually Work?

Unless this is your first RMD (in which case you have an April 1st deadline), you are required to take your RMD by December 31st of each year.  The amount you are required to take is calculated based on your life expectancy. These life expectancy tables are usually static but, in a nod to increased life expectancy for Americans, the tables were recently updated.  These new tables, however, will not go into effect until 2022.

Keep in mind, if you are dealing with multiple accounts, 401(k)s/403(b)s/IRAs, you will need to pay attention to how the RMDs are calculated and distributed.  Typically, all employer sponsored plans need to be calculated and distributed separately, but IRAs while calculated separately, can have a combined distribution. Remember there are no RMDs due from your Roth IRA.

See this table for more information:

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