Discussing updates to Required Minimum Distributions (RMDs) in 2021 with Wealth E&P
October 12, 2021
Welcome to Wealth Enhancement & Preservation’s weekly Market Minute, where we get to update you on everything that happened in the financial markets this week. My name is Armand Glassman, and I am a partner at Wealth E&P and work as the Chief Portfolio Manager and a Certified Financial Planner™.
Last week, the major indices all started down, but finished the week slightly positive. So, it was a good week to be invested in equities. I wanted to talk today about some important changes that have been made to the RMD rules. "What's an RMD?" – you may ask.
RMD stands for Required Minimum Distribution, and they are required from qualified plans once you reach a certain age. However, this has changed. The CARES Act suspended RMD requirements for the year 2020, but that suspension is gone. You must pay your RMD in 2021.
The SECURE Act has changed the required minimum distribution date that you have to take these. The requirement is age 72 now, but it was age 70 and a half previously. Some of you may be thinking – "Well, I'm not 72, so I don't have to worry about this." If you receive an inherited qualified plan, you do have to worry about RMDs as well.
The other important update with the SECURE Act is that instead of being able to stretch your RMD requirement over a lifetime, you must now empty the account within 10 years. This could require you to do some additional tax planning that you weren't thinking about before. This may also include talking to a qualified tax professional, or coming in to talk to Wealth E&P so that we can put you on the right track.
Because this Market Minute discusses both regular RMDs and beneficiary IRA RMDs, there may be uncertainty about which part the 10-year rule is referring to. The newer 10-year withdrawal rule only pertains to beneficiary IRAs. Up until January 1, 2020, beneficiaries were allowed to stretch withdrawals over their life expectancy, but now must empty the account within 10 years. Traditional IRAs can still be stretched over your life. Also, if you were already distributing from an IRA inherited prior to 1/1/20, you may continue to stretch it over your life. Only inherited IRAs received after January 2020 must be withdrawn within the 10-year window.
If you have questions about RMDs or qualified plans, Wealth Enhancement & Preservation is here to help – we can be your advisor and guide through the process. Give us a call or contact us at any time, and we can discuss how we can best serve you.
If you have any other questions for us, if you want a risk profile, or if you would like a retirement projection, please feel free to reach out or visit www.wealthep.com. Otherwise, stay tuned for our next Market Minute next week!
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