The pandemic is creating worry among those who are monitoring their retirement accounts. As we watch the stock market dip, Carl Carlson, CEO of Carlson Financial, gives us some tips to do with our IRA’s during these unpredictable financial times.
Just months after the passage of the SECURE Act, we’re seeing some additional (temporary) changes to IRA rules for the year.
When it comes to who is affected by IRA rule changes you may be thinking of people who are taking money out or putting money in. If you fall in either camp here are some recent rule changes.
If you are taking money out, it depends on why you are doing so.
Many people take money out of their IRAs each year to fulfill their Required Minimum Distributions (RMDs). This is an amount the IRS requires those over a certain age to withdraw. This year, RMDs are waived! Even if you are normally required to take one, this year you do not, and you don’t have to make up for it next year.
Others may occasionally take an early withdrawal from their IRA – earlier than age 59.5. Typically, when you do this, you’ll owe a 10% penalty on whatever you took out. If you did that in 2019, the good news is that you don’t have to pay the penalty until the new tax filing date, July 15.
If you take an early withdrawal this year and it’s due to certain coronavirus-related exceptions, you may be able to take out up to $100,000 and not pay a penalty on that (even though you will still have to pay taxes). Down the road they will even let you repay your IRA for the money you take out, within 3 years Carlson said.
If you are making Qualified Charitable Contributions from your IRA you can still do that, but it will not count toward fulfilling your RMD for the year, since there is no RMD requirement.
If someone already took their RMD out before this rule changed, some things depend on if they can put it back Carlson said if it was within the last 60 days, they will likely be able to return it to their IRA under the “60-day rollover” provision. If they took it outside of the 60-day window, they might still be able to return it if they meet one of the exceptions I mentioned earlier, as being affected by the coronavirus.
The only change with people putting money into their IRA is that the tax filing deadline was moved from April 15 to July 15. IRA contributors will also have until July 15 to get in any contributions they want to make for 2019.
If you haven’t maxed out for 2019 yet, Carlson said to do that before you make any 2020 contributions!