The CARES Act and RMD Changes
Required Minimum Distributions
What changed: Perhaps the biggest retirement-related change the CARES Act made was suspending all required minimum distributions (RMDs) from retirement accounts for 2020. These accounts include 401(k)s, inherited retirement accounts, 403(b)s and 457(b)s.
The provision is very broad and is not a push off to 2021 – you will not have to take two RMDs next year. In essence, you do not owe any RMDs for 2020, inherited or otherwise.
The impact: The biggest impact from waiving RMDs for 2020 is that retirees can leave their retirement accounts alone for another year. With a lot of market volatility and uncertainty in the economy, many retirement accounts might have seen a decline in value during the start of the year after high balances at the end of 2019 (the time period RMDs would have been calculated on).
It can be a huge benefit to retirees if they leave their investments alone for a year and let them recover from the market downturn. They still have the flexibility to pull out as much money as they need from their retirement accounts in 2020, they just aren’t required to take out anything.
The 2020 RMDs suspension also makes doing Roth Conversions easier as retirees don’t need to take out their RMD before doing a conversion. With many retirees experiencing lower taxes due to the Tax Cuts and Jobs Act and the decline in the market, now could be an opportune time to do Roth Conversions