Did you take a Required Minimum Distribution (RMD) from your IRA earlier this year? If so, to help with the financial fall-out from COVID-19, the IRS is allowing you to reverse your 2020 RMD distribution … but you must act by August 31. In a July 28th Grand Rapids Business Journal column, Anastasia Wiese, JD, CFP® describes how the RMD “put-back” works, and whether to consider taking advantage of the opportunity.
It helps to understand the historical context. Until 2019, the IRS mandated that individuals must start withdrawing annual RMDs from their traditional IRAs at age 70½, typically paying ordinary income tax on the withdrawals. In 2019, the SECURE Act raised that age to 72.
Then, along came COVID-19, and the March 2020 CARES Act. This Act suspended 2020 RMDs entirely from many types of retirement accounts, including IRAs.
But what if you’ve already taken your 2020 RMD? On June 23, the IRS issued Notice 2020-51, allowing you to roll the withdrawal back into the account from which it came. If you are depending on the income to cover living expenses, you don’t have to put it back. But if have other income sources and can afford to keep your tax-deferred investments growing for longer periods of time, you now have the chance to do so, as long as you act by August 31, 2020.
If you decide to take advantage of the put-back, there are a few other details to be aware of, including how to treat taxes already withheld. To learn more, read Anastasia’s article here.