A year without RMDs? And other changes

1. If you’ve been financially negatively impacted by Covid19, you are eligible to take up to $100,000 from your retirement account(s) at any point during 2020, without penalty, and pay it back within 3 years. If you don’t intend to pay it back, you can spread the tax out over 3 years. This is a *significant* planning opportunity, so please talk with us prior to making any distributions/repayments.
2. Required Minimum Distributions (RMDs) from IRAs have been waived for 2020. This applies to all flavors of IRAs (Inherited, SEPs, SIMPLEs) and company retirement plans (401(k)s, 403(b)s, 457s). Note that this only matters for people who had an RMD requirement previously, or who turn 72 this year.
   • If you need all or part of your RMD to cover your living expenses, don’t give this a second thought. Keep doing your thing.
   • If you’d normally save your RMD, or you have non-retirement assets that can cover your expenses, we recommend suspending any regularly scheduled withdrawals for the rest of the year.
   • If you’ve already taken your RMD in the last 60 days, you can return it.
   • If you’ve already taken your RMD but it was more than 60 days ago, bullet #1 may apply to you.
3. This is a great time to consider converting some of your IRA/401(k) savings to a Roth.
   • If you don’t need your RMD, consider converting those funds to a Roth instead. Need help? Feel free to reach out to us anytime.
   • The main benefits of Roth IRAs, briefly:
     • No RMD requirement
     • No tax on growth or distributions (to withdraw earnings penalty-free, the Roth needs to have existed for at least 5 years)
     • Best asset to pass on to heirs, especially in light of the many changes to the tax code from the SECURE Act late last year
     • Reduces future RMDs on IRAs/401ks, and the associated taxes on those distributions
4. If you are charitably inclined:
   • Normally we have to itemize our deductions to write-off charitable donations. But, for 2020, even if you choose the standard deduction, you can deduct $300 of charitable donations ($600 for joint filers).
   • Qualified Charitable Distributions (QCDs) are still allowed in 2020, though there is less of an immediate tax incentive. Please chat with us about whether or not it makes sense to continue with QCDs, or make gifts from non-retirement savings instead (cash or appreciated stock).
   • If you have money sitting in a Donor Advised Fund, please consider disbursing some of it now to local organizations on the front lines of the Covid19 crisis. We have a few favorites, and we’d love to hear yours! Please leave a comment and help spread the word about organizations doing great work right now.

Sending virtual hugs from the whole Painted Porch Team!