Every year, people of a certain age have to take money out of their retirement accounts. That age used to be 70 and a half, but is just recently changed to age 72.
And here’s another change in the law: If you don’t want to, you don’t have to take out any money in 2020 regardless of your age. That’s right, because of COVID-19, the government just passed a law that says this year, and this year only, there will be no penalties for failing to take the required minimum distribution from your retirement account. (Normally, if you failed to take the money, you would get penalized with a huge tax.)
For some people, this can be great news. If you don’t need the money, you can leave it in your retirement account and allow it to grow tax free. And even better, you won’t be forced to “sell low.” (Right now, stocks are low. And as the adage goes, you want to buy low and sell high. Selling low is not a great way to make money.)
But whatever you decide, be sure to check with your financial advisor. Skipping your RMD is 2020 could be right for you, but there may be a better option. Ask you financial advisor about converting your IRA into a Roth IRA. For some people, with stocks currently as low as they are, it could be a create time for a conversion.
(We at Gilsoul & Associates are not financial advisors; we are attorneys. But we are attorneys that understand finances and taxes. An attorney who’s good at math can be a rarity, but when it comes to your estate plan, you want to make sure that any legal move you make isn’t a bad tax move or a bad investment move.)