The CARES Act, the fiscal stimulus legislation passed in response to COVID-19, lifts the requirement for individuals to take Required Minimum Distributions (RMDs) from their retirement accounts in 2020. As part of the LPL Financial Government Relations team, we worked with industry associations and several US Senators to push for this important addition to the bill so our retirees would have the flexibility to manage their retirement distributions while markets are down due to the COVID-19 crisis.
Missed RMDs are not subject to the 50% tax penalty for 2020.
Those persons who are currently subject to RMD rules, in addition to those with inherited IRAs, would be free to stop withdrawals, lower withdrawals, or choose to take no distributions altogether in tax year 2020 and will not be subject to the 50% tax penalty, which ordinarily is assessed for amounts not distributed as income.
We wanted to get this out so those who might like to make changes could begin that planning with us now.