As 2021 comes to a close, we want to remind retirees to take required minimum distributions (RMDs) by December 31, 2021. Required minimum distributions are minimum amounts that must be withdrawn annually from most retirement plan accounts and IRAs once the account owner turns 72. There are exceptions to the rules. If you are uncertain if you need to take an RMD, we recommend you check with your advisor.
The required distribution rules apply to:
- Owners of traditional Individual Retirement Arrangements (IRAs)
- Owners of traditional Simplified Employee Pension (SEP) IRAs
- Owners of Savings Incentive Match Plans for Employees (SIMPLE) IRAs
- Participants in various workplace retirement plans, including 401(k), Roth 401(k), 403(b) and 457(b) plans
Roth IRAs do not require distributions while the original owner is alive.
Please note that prior law required individuals to begin taking RMDs when they reached 70 ½. Individuals who turned 70 ½ on or before June 30, 2019, must take an RMD be December 31, 2021. Individuals who turn 72 in 2021 must take their first RMD by April 1, 2022.
2020 RMDs and CARES Act
An IRA owner or beneficiary who received an RMD in 2020 had the option of returning it to their account or other qualified plan to avoid paying taxes on that distribution. A 2020 RMD that qualified as a coronavirus-related distribution may be repaid over a 3-year period or have the taxes due on the distribution spread over three years. A 2020 withdrawal from an inherited IRA could not be repaid to the inherited IRA but may be spread over three years for income inclusion.
Should you have questions about this topic, or any other topics related to your personal or business situation, please contact us at any time.
DISCLAIMER: The WM Update, WM Wednesday Wisdom, WM Daily Update COVID-19, COVID-19 Business Resources, COVID-19 Client News Alerts and other related communications are intended to provide general information, including information regarding legislative COVID-19 relief measures, as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.