One impact of recent federal legislation relating to COVID-19 is a change in the law that normally requires those 70 ½ or 72 to take a Required Minimum Distribution (RMD) from IRAs or 401(k) plans. One provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act is that no RMD is required for 2020, according to the Schwab Center for Financial Research.
RMD amounts are based on the value of the account at the end of the previous year. Rob Williams, Vice President of financial planning, retirement income and wealth management at the Schwab Center for Financial Research (SCFR) said in a release: “Because most accounts have seen a steep decline in 2020, the amount of the required withdrawal would have been a much larger percentage of a retiree’s account. The new law lets retirees keep that money in their accounts, potentially recouping some of the market losses when the economy turns around.”
If somebody does not need that withdrawal and can defer it, it would also mean those who would normally have to withdraw funds could potentially have lower reportable income for 2020, and possibly a lower tax burden.
You should always consult a financial or tax advisor regarding how such provisions would affect you.