February 22, 2021
Dear Friends and Clients,
As a reminder, The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), passed last year, suspended required minimum distributions (RMDs) for 2020. The relief provided by this provision was broad and extended to traditional IRAs, SEP IRAs and SIMPLE IRAs, as well as 401(k), 403(b) and governmental 457(b) plans. Both retirement account owners and beneficiaries taking stretch distributions were allowed to bypass RMDs for the calendar year of 2020.
So, what does this mean for this year? Since last year’s exemption hasn’t been extended, anyone who is 72 or older in 2021 must make a withdrawal before year-end (December 31). If you turn 72 this year, you may delay your first withdrawal until April 1, 2022. As you know, it is important that we initiate your distribution by the appropriate deadline, as failure to withdraw your RMD can result in an IRS penalty of 50% of the amount that should have been withdrawn.
So, while you may have all year to withdraw the money, you can always calculate your 2021 RMD now and plan ahead using the life expectancy tables provided by the IRS. As a refresher, your required withdrawals are based on the balance in your retirement savings account(s) as of Dec. 31, 2020 and the applicable life-expectancy factor based on your current age.
Depending on your tax situation, you may want to direct the RMD amount toward a Qualified Charitable Distribution (QCD). Briefly, a QCD, which can be made only by IRA participants who are at least 70½, may be as high as $100,000. The funds must be sent directly to the qualified (IRS-approved) charitable organization. In most cases, you will report the QCD as a nontaxable distribution from your IRA on your tax return. If you wish to take advantage of this provision, please let me know and I will make note of it.
Please contact me at 360.671.0226 if you have any questions about your 2021 RMD as part of your overall retirement plan.
Sincerely,
Matt Goodrich, Financial Advisor
President, Goodrich & Associates, LLC
Branch Manager, RJFS
Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Goodrich & Associates, LLC. is not a registered broker/dealer and is independent of Raymond James Financial Services Inc. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. and Goodrich & Associates, LLC.