The IRS has good news for those who already took a required minimum distribution, or RMD, this year but now are having second thoughts.
Earlier this year, passage of the federal Coronavirus Aid, Relief, and Economic Security Act, better known as the CARES Act, gave taxpayers the option to skip taking an RMD from their individual retirement account or defined-contribution retirement plan, such as a 401(k) or 403(b) plan, in 2020.
What if you already took an RMD this year? The IRS says you can roll the money back into a retirement account, and that the 60-day rollover period for RMDs taken this year has been extended to Aug. 31.
In addition, IRA owners or beneficiaries who have received a distribution from an IRA “of an amount that would have been an RMD in 2020” can repay the distribution at any time up to Aug. 31.
The IRS notes that the new rule also applies to anyone who turned age 70½ in 2019 and thus would have had to take their first RMD by April 1, 2020.
What is a required minimum distribution?
An RMD is a minimum amount of money that Uncle Sam requires you to withdraw from most types of retirement accounts each year once you reach a certain age.
Fail to take an RMD in full and on time, and the IRS will hit you with a steep fine, as we detail in “Beware These 3 Tax Penalties on Retirement Accounts.”
Previously, everyone subject to RMDs had to start taking them for the year in which they turn 70½. The federal Secure Act of 2019 increased that age to 72 for people who turn 70½ after Dec. 31, 2019.
Normally, the deadline for your first RMD is April 1 of the year after you turn 70½ or 72, depending on your situation. After that, your RMD deadline is always Dec. 31.
How to get your retirement on track
The government’s decision to let people skip their 2020 RMD is a big deal for retirees who want to avoid paying taxes on distribution while also letting their money continue to grow. Financing your golden years can be a tricky endeavor, so any help from Uncle Sam is welcome.
If you’re looking for tips on how to build and maintain a nest egg, check out “Your Top 5 Retirement Questions, Answered.”
If you are still working, but retirement is just over the horizon, consider enrolling in our retirement course. It’s a 14-week boot camp with everything you need to plan the rest of your life, know you’ll have enough money and make your retirement dreams a reality.
The course is intended for those who are 45 or older, and can teach you everything from “Social Security secrets” to how to time your retirement.
For more on the course, check out The Only Retirement Guide You’ll Ever Need.
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