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IRA Required Minimum Distributions (RMDs): What’s New and What’s Not

By July 15, 2021No Comments

ORIGINAL ACCOUNT HOLDER RMDs

Following a one-year hiatus in 2020 as part of the CARES Act where no RMDs had to be taken, in 2021 all individuals who turn 72 or have previously taken RMDs are required to take a distribution before December 31, 2021, or by April 1, 2022 if it is a first distribution.

Note that the CARES Act changed the age when RMDs must start to be taken from 70 ½ to 72. What remains the same, however, is that Qualified Charitable Distributions (QCDs) can still be utilized beginning at age 70 ½.

INHERITED IRA RMDs

No changes to existing inherited IRA accounts already in distribution phase. 

If you inherited an IRA account before 2020 there is no change to your distribution schedule, and you can stretch this over the remaining years of your life.
Life expectancy tables for spousal and other qualifying beneficiaries are also unchanged. And if you inherited an IRA account before 2020 there is no change to your distribution schedule, and you can stretch distributions over the remaining years of your life.

Changes for newly inherited IRA accounts for non-spouse individuals

If you have inherited an IRA in 2020 or 2021 and beyond, there is a new 10-year distribution requirement. Non-spouse individuals now have 10 years to take the entire amount out of the inherited IRA by the end of the 10th year. This is the combination of the inherited amount plus any growth. There are a few exceptions which include a disabled or chronically ill person, a child who is not the age of majority, or a non-spouse individual who is no more than 10 years younger than the original IRA account owner.

PLANNING CONVERSATIONS

We have had great conversations with many of our clients and want to highlight some ideas to talk about at your next meeting:

▪ Upcoming tax changes. While we do not want to plan on hyperbole or guesses as to what the tax laws will look like in 2022 and beyond, we can be proactive and plan for an individual’s goals and needs within the current tax structure. This can include:

  • Taking capital gains now
  • Gifting—both charitably and to family/friends
  • Roth conversions
  • Backdoor Roth IRA contributions

 

▪ Various planning topics. Although not part of our direct business, we have helped clients with planning around various financial areas, including in collaboration with their other financial professionals, such as:

  • Refinancing property or other outstanding debt to take advantage of low rates
  • Business transitions
  • Life and disability insurance reviews