These are trying times and we all have information overload, but one small
piece of the new emergency tax relief legislation that seems “lost in the
sauce” is perhaps the most important for retirees. There was a last minute
push for seniors to be included in the $1,200 relief checks, although if
retired and on fixed income they are “less affected in theory.” Many are
supporting in some way a family member, child or grandchild, so we believe
this was fair and the right thing to do.
However, it’s only $1,200, and the real gem for most retires has not been
featured much in the media, as our focus has been on our collective health.
IF YOU’RE OVER 70, THIS IS IMPORTANT!
All retirees may skip any RMD from IRAs in 2020! Now in English, if you are
at an age that would have otherwise required you to take an RMD, you are
allowed this one year to not take any distribution from your IRA, 401k, 403B
or any other retirement accounts. Normally, you are forced to take
distributions, and if you don`t, you can owe extreme penalties, but as part
of the latest emergency packages, it is all waived in 2020! Of course, if
you need to have that income than you certainly can take it, but you are not
This is important for many as they have those pre tax accounts in
investments, stocks, bonds, etc., that are likely worth 25% less than before
the crisis began, so taking any amount means selling assets when they are
worth less. By skipping for instance a $10,000 RMD when your account value
is down 25%, you are saving over $3,300 in lost value, assuming the account
will recover over time. Of course, we are not giving anyone advice, we are
just saying that the fact that you have this option seems lost in the sea of
information coming at us all.
Reach out to a tax planner or your advisor and discuss your options around
the subject. Perhaps discuss Roth conversions as well, but any conversions
should be done by account or ledger transfers, without selling anything.