Social Security Report

Required Minimum Distributions (RMDs) Suspended for 2020

For many seniors in their 70’s who have a retirement nest egg tucked away in a tax-advantaged savings account like an IRA or 401(k), the Required Minimum Distribution, or “RMD,” is all too familiar. The RMD is a percentage of those tax-deferred savings which Uncle Sam, or more specifically the IRS, says you must take out each year and pay income taxes on, whether you need the money or not. That isn’t necessarily a devastating thing in a normal economy, but since the financial markets have lost about 30% of their value since the beginning of this year, the RMD could have a perverse effect on retirement savings.

The IRS uses your account value at the end of the previous year to compute your current year RMD, and your account value at the end of 2019 was surely much higher than it is now. So requiring withdrawals from a decimated investment account to satisfy an RMD based upon a pre-pandemic market value would be especially damaging to your future. Recognizing this, the recently enacted CARES Act (Coronavirus Aid, Relief, and Economic Security Act) changed the rules so that RMDs are suspended for 2020, meaning that you won’t need to withdraw funds from your decimated savings this year (unless needed). This Montana Standard article by Catherine Brock explains the details.

This posting is presented for informational purposes only and does not represent legal or financial guidance. Any opinions or interpretations presented are either those of the original author or, in the case of articles authored by the AMAC Foundation, are the opinions of AMAC Foundation staff, originally trained and accredited by the National Social Security Association (NSSA) and certified via the AMAC Foundation. Any links included in the article are valid on the posted date; socialsecurityreport.org cannot guarantee the duration of the links’ validity. NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (https://amacfoundation.org/services/) or email us at ssadvisor@amacfoundation.org. Because we are a non-profit organization, there is no charge for these services.