Information for Our Clients Who Receive Required
Minimum Distributions (RMDs) from their Retirement Accounts

Dear Clients and Friends:

We hope that this letter finds you healthy, well, and hunkered down. These are stressful times and as we've all been acutely aware, this pandemic has resulted in unprecedented disruptions to our businesses and our way of life. In response to this, Congress recently passed legislation called the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which among other things, waives the Required Minimum Distributions (“RMDs”) for the 2020 year.

Owners of tax-deferred retirement accounts (e.g., IRA, 401(k), etc.) must eventually begin taking out their RMDs and pay taxes on the amount of the distribution. Prior to 2020, the triggering age for RMDs was the year you turned 70 ½. Now, the triggering age was moved to age 72 due to the SECURE Act, which took effect at the start of 2020. Additionally, if you inherited a retirement account from a parent, you are required to take out RMDs from the inherited retirement account even if you are under age 72.

The benefits of Congress waiving the 2020 RMDs cannot be overstated. Typically, the formula for calculating the RMDs is to take the market value of the retirement account as of December 31st of the previous year and multiply that balance by the formula in the IRS table based on your remaining actuarial life span. If you did that for this year, then due to the volatility of the stock market, your RMDs would be disproportionately higher as a percentage of the current market value of your account. The new law lets retirees keep that money in their account in the hope that it will potentially help the retirees recoup some of the market losses when the economy eventually turns around.

Please note that due to how recently this law was passed, regulatory guidelines will follow to address the specific and logistics of the waiver of the 2020 RMDs.

If you are currently taking RMDs and you need them to cover expenses, you can still take withdrawals from your retirement accounts. Otherwise, if you have other resources, you should avoid withdrawing from your retirement accounts to allow the tax-deferred funds to continue to grow.

As always, please let us know if you have any questions or other concerns affecting your estate plans.

Wishing you the best through these challenging times,

David Frees, Douglas Kaune, and Andrew Friedlander

David M. Frees, III
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