One COVID-19 Tax Relief Fact That Retirees Should Understand!

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

required to!

 

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.