A key aspect of saving for retirement through qualified retirement plans and IRAs is deferring taxes until required minimum distributions (RMD) begin. Even with Roth IRAs, beneficiaries who inherit them must also follow RMD rules despite the tax-free treatment of the distributions. The failure to take RMDs can result in a 50% penalty. The SECURE Act (P.L. 116-94) and the CARES Act (P.L. 116-136) made dramatic changes in RMD rules for 2020 and beyond.

Changes for 2020

The CARES Act provides a waiver for RMDs from defined contribution plans (e.g., 401(k) plans) and IRAs for 2020. Those who would otherwise be required to take an RMD for 2020 need not do so. The waiver also applies to the 2019 RMD for an individual who has a required beginning date of April 1, 2020 (someone who attained age 70½ in 2019 but did not take the first RMD by Dec. 31, 2019, postponing it to April 1, 2020). Of course, distributions to those subject to RMDs can exceed required amounts at any time.