05 Feb Can I skip my 2021 IRA distribution because of COVID?

Q. In 2020, Required Minimum Distributions (RMDs) were suspended due to the coronavirus. Will the federal government continue this for 2021?
— Retired investor

A. It’s a great question.

Before the coronavirus pandemic, IRA owners who were over the age of 70½ were required to withdraw a certain amount from their IRA account before the end of the year, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

The required amount depends on the owner’s age and the value of the account on the last day of the prior year, he said

Kiely said compared to where the S&P 500 closed at the end of 2019, the index dropped more than 30.7% by March 23, he said.

That would have meant many people who needed to take their Required Minimum Distributions (RMDs) would have had to sell securities, potentially at a big loss.

Kiely said the CARES Act waived RMDs for 2020.

“If you already took your RMD, you had the 60-day rule to return your distribution to your IRA,” he said. “Later legislation said everyone could return the distribution by Aug. 31, 2020.”

There are several pieces of legislation that could make more changes.

First, Kiely said, there is legislation moving through Congress to move the RMD age to 75. This change would not apply to those who are currently 70 or older, he said. This legislation has not been enacted, he said.

So for 2021, will there be another RMD waiver?

As Kiely said, the 2020 waiver was because the stock market suffered a tremendous loss in the first quarter of 2020.

“As I write this the S&P 500 is just off of it’s all time high,” he said. “I think it will be unlikely that 2021s RMD will be waived.”

But given the stock market, this is a time when you could be selling high, he said.

“If you need the income to buy groceries, by all means take your RMD,” he said. “If you are in the position where you don’t need the cash flow, wait until December before you take your 2021 RMD.”

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This story was originally published on Feb. 5, 2021.

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