By LouAnn Schulfer, AWMA®, AIF®
Accredited Wealth Management Advisor^SM
Accredited Investment Fiduciary®

In retirement planning, Required Minimum Distributions (RMD’s) are a huge topic, and we’ve seen some big changes this year.  These mandatory withdrawals apply to certain retirement accounts, and are based off of the account value on December 31st of the prior year as well as the Uniform Lifetime Table provided by the IRS.(1).  For example, if you own a traditional IRA or other pre-tax retirement account, you must begin distributions by a certain age:  through calendar year 2019, you were subject to these RMD rules if you turned 70 1/2 by 12/31/2019.  The SECURE Act, signed into law on 12/20/2019, changed that age to 72 beginning in 2020.  Inherited retirement accounts are different:  most non-spouse beneficiary accounts under the new SECURE ACT rules “are generally required to be distributed by the end of the tenth calendar year following the year of the employee or IRA owner’s death. (2 )  This essentially means that the balance of the IRA is to be withdrawn by the end of the 10th year and, if it is not in a ROTH account, will be added to the beneficiary’s taxable income.

With the significant economic impact of the corona virus, Congress signed the CARES (Coronavirus Aid, Relief and Economic Security) Act into law on 03/27/2020.  Financial markets have been subject to considerable volatility and as such, this bill waives the requirement for RMD’s in 2020 on all defined contribution plans such as 401(k)s, 403(b)s and IRAs.  Many retirement accounts are invested in stocks, bonds, mutual funds, and other “variable” investments, subject to market volatility.  Since the formula for calculating the RMD is based off the prior December 31st value, retirement account owners could be subject to a distribution in 2020 based on a much higher value than the value of the account at the time of the distribution.  The CARES Act allows for a true waiver, meaning the otherwise required distribution for 2020 will not have to be made up in 2021.

Distribution rules for retirement accounts can be complex and as we’ve seen twice in the past three months, are subject to change.  If you are unsure how the rules may apply to you, please consult with a qualified professional.

LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Wealth Management and can be reached at (715) 343-9600 or louann.schulfer@lpl.com.  www.SchulferAndAssociates.com

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC.