• Keith Fulfer

The IRS allows for RMD reversals.

The IRS this week issued revised and expanded retroactive RMD rollover relief via Notice 2020-51. This latest RMD guidance affects retirement withdrawals made any time in 2020 before April 1, which was the deadline for people who turned 70½ in 2019. Those RMDs still applied, since the SECURE Act age hike goes into effect this year. But now affected folks have until Aug. 31 to put that retirement money back into their tax-deferred accounts.

The SECURE Act, as the Setting Every Community Up for Retirement Enhancement Act is called, moved the age at which retirement account owners must start taking required minimum distributions (RMDs) from 70½ to 72. This act was passed in late 2019. The CARES Act, the Coronavirus Aid, Relief and Economic Security law that got a lot of attention for its stimulus payments. It was passed in early 2020. Not only did it provide for the stimulus payment but it also included some specific relief for those facing RMDs, waiving mandated withdrawals in 2020.

The original act provided that an RMD taken out for 2020 could be undone, but it must have been done by July 15. It also only allowed RMDs taken after February 1st, meaning that those proactive taxpayers who took distributions in January were left out. Thanks to the IRS revision, account owners who took RMDs in January now can undo them. The deadline now to make this change is August 31 for everyone.

This latest decision by the IRS also extends the August 31 deadline to beneficiaries who have inherited IRAs, 401(k)s or other RMD-affected retirement accounts.

But the decision to put the money back is not a slam dunk decision. You may need the money. Or you have spent it already! You may also consider a Roth conversion. Or you may reinvest the money and wait to make the decision closer to the August 31 deadline. This is an opportune time to talk to your financial advisor.

Contact us if you have any questions.

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