The bipartisan COVID-19 stimulus bill just signed by President Trump includes welcome tax relief for retirees: The required minimum distribution rules for Individual Retirement Accounts and 401(k)s are waived for 2020. That means that instead of taking money out this year, retirees can keep their investments growing. The RMD waiver applies to 403(b) accounts, SEP IRAs, and SIMPLE IRAs. This is a repeat of the 2009 RMD holiday during the Great Recession.
For many retirees, who depend on their retirement account withdrawals for basic needs, the RMD holiday is a moot point. They need the money, so they’ll take their RMDs anyway. But for others who might hear the news and stop withdrawals, they need to calculate whether that’s the best move taxwise.
“I wouldn’t just turn off the spigot,” says Ed Slott, a CPA and IRA expert in Rockville Centre, N.Y. “There are opportunities here. You might want to look at your tax bracket and get money out at low rates. If anything is obvious, it’s that tax rates are going to go higher.” Other strategies the RMD holiday favors that you should consider include Roth conversions and IRA charitable rollovers.
Investment Advice offered through Bickling Financial Services, Inc., a registered investment advisor. Securities offered through Purshe Kaplan Sterling Investments, Member FINRA/SIPC Headquartered at 80 State Street, Albany, NY 12207. Purshe Kaplan Sterling Investments and Bickling Financial Services are not affiliated companies.