INVESTMENT

Care Act and RMD


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Rebecca Katz: “What are the advantages and disadvantages of not taking IRA RMD, so minimum delivery is required?” When you reach a certain age, you have to take money from your IRA, but the Care Act waived it, and you don’t have to take it this year. So can you talk a little more about the Kears Act?

Maria Bruno: The Cares Act was passed in late March as part of the stimulus package. I think there were two main provisions for investors, one, not to accept the minimum distribution required for this year. We basically get a free pass this year.

So if you don’t need the money, the natural tendency is to keep it in the IRA and let the money grow. You participate in market participation, hopefully, as markets ebb and flow and go up.

Another thing to consider though, is this an opportunity from a tax planning perspective? With RMDs, there are some strategies that you can use and you certainly don’t have to take the full amount of RMD, but if you’re in a relatively low tax bracket this year, you may want to take the distribution you’re probably paying relatively low taxes. You are lowering your IRA balance, which will reduce RMD in the future. So these are a couple issues that should be considered.

A normal tendency would be not to take it, but I would really consider whether there is a tax planning opportunity to do so.

Another thing I would say is if you are enrolled in an automated RMD program, Vanguard makes an offer, if you want to actively suspend it, if you do not want to take delivery. So you can go online and postpone it for 2020.

Important information

All investments are at risk, including the potential loss of money you invest. There is no guarantee that any specific asset allocation or combination of funds will meet your investment objectives or give you a certain income level. Diversity does not guarantee gain or protect from loss.

This webcast is not only for educational purposes but also considers other issues that may be important in your particular situation or investment decision. We recommend that you consult a tax or financial advisor about your personal situation.

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