August 5, 2020

On February 12, 2020, the New York Stock Exchange reached an all-time high, closing at 29,551. Consumer confidence was skyrocketing and for many Americans, their retirement accounts were growing.

We all know what happened next.

Barely two weeks later came reports of the first American death attributed to COVID-19. Within a month the American economy would be paralyzed by a national shutdown of all “non-essential” businesses. Just a few months removed from a record high on the New York Stock Exchange, America was plunged into a recession.

The economic devastation from COVID-19 has profoundly impacted retirees who must withdraw money from their IRAs. Generally, prior to 2020, retirees over age 70 1/2 must take an annual “Required Minimum Distribution” (RMD) from their IRA each year.

Given the fallout from millions of Americans’ retirement accounts dramatically losing value this year, Congress included two important provisions in the CARES Act to offer retirees relief.

Waiver on Required Minimum Distribution

The CARES Act suspends the requirement for most individuals to take the 2020 RMD. The thinking is that as the market rebounds, leaving your 2020 RMD in your IRA will allow you to recoup some of the lost value in your portfolio and better secure your retirement future.

Ability to replace previously withdrawn funds

If you didn’t take your annual RMD before the CARES Act was passed, you don’t have to take any action, you can simply skip this year’s RMD and resume in 2021. But what about those individuals who already withdrew their RMD from their IRA early in 2020? The CARES Act provides relief for you as well, but the clock is ticking and you must act quickly.

Most individuals who took their IRA 2020 RMD can repay that money back into their IRA. The key is that in order to take advantage of this provision, repayment MUST be made in full by August 31, 2020.

Please understand that this is a very basic overview of the CARES Act provisions as they relate to annual distributions from your IRA. As with all IRS regulations, there are complex layers of rules and guidelines related to RMD distributions.

There are also rules outlining the treatment of a previously withdrawn RMD (ex. it will be classified as a rollover in some cases, but not for others).

If you think you or a loved one may be eligible to repay a previously distributed IRA RMD for 2020, or if you are uncertain where you stand with your retirement account in the wake of COVID-19 and the implementation of the CARES Act, reach out for assistance. August 31, 2020 is a hard deadline to take advantage of this unique opportunity to protect your retirement savings.

Attorney John F. Leone has practiced for more than 25 years with a focus on helping people with their retirement plans, wills, estate planning, and estate and trust administration. He can be reached at Gross Shuman, P.C. by calling 716-854-4300 ext. 243 or [email protected].