Should You Be Bringing Back Your 2020 Minimum Distributions?
If you took the required minimum allocations from your traditional IRA or 401 (k) in 2020, you may be able to get them back. The CARES Act allows retirees to waive both the 2020 Required Minimum Distributions (RMDs) and any 2019 RMDs due by April. January 1, 2020 for persons who turned 70.5 years old in 2019. This means that if you collected your RMDs before learning about the disclaimer, they could be returned.
As Money.com explains:
The CARES Law lays out several specific scenarios that allow those who previously adopted RMDs to reverse their decision. If you do not need this money to pay bills, you can return it. Additional income can push you into a higher tax tier for the year and a higher income tier for Medicare premiums in the future, forcing you to pay more monthly for Part B and, if applicable, Part D.
If less than 60 days have passed since you received the RMD, you can return it back to the account from which you debited it, or, if you prefer, to another retirement account. This 60-day renewal option has always been available to retirees (even before the pandemic), although the previously required minimum allocations could not be canceled. Now that RMDs have been canceled for 2020, any RMDs you have withdrawn so far are considered voluntary distribution, which means they are eligible for renewal.
If more than 60 days have passed since you received the RMD, you can still use the renewal option. The IRS recently extended the rollover deadline for people whose 60-day limit would fall between April 1 and July 15. If that’s you, the IRS now gives you a deadline of July 15th to complete your renewal.
I’ll let Vanguard explain this in more detail:
Rollovers usually have to be completed within 60 days of the distribution, but the IRS has extended the 60-day rollover deadline to July 15, 2020 for distributions including RMDs for which the 60-day rollover deadline fell between April 1, 2020 and 15 July 2020 As a result of this extension, individuals who received RMDs between February 1, 2020 and May 15, 2020 will likely have to complete the transfer by July 15, 2020. If you chose the January distribution, unfortunately it is does not get into the extended rollover window.
Of course, you can only do one rollover per IRA per 365 day period, so keep that in mind when deciding what (and when) to roll back into your retirement accounts. You will also need to pay the entire distribution, including any taxes charged from it, before the money reaches your bank account.
If your finances are in a situation where you would rather withdraw money from your retirement account rather than return it back, you may also be eligible for the coronavirus-related spread. The IRS allows people directly affected by COVID-19 to remove “the cumulative cap of $ 100,000 from all plans and IRAs.” You will have the next three years during which you will be able to pay benefits related to the spread of the coronavirus without federal tax; otherwise, you can choose to proportionate taxes over a three-year period.
Read the IRS FAQs on the spread of the coronavirus to learn more, then ask yourself if it is better to withdraw some extra money from your retirement accounts this year, or put the required minimum payments back into your accounts so that the money is there when you really need it. need to.