When the CARES Act was signed in March 2020, a provision suspended the required minimum distribution (RMD) from retirement plans. The distribution amount was calculated at the close of 2019, before markets crashed in March and April. As a result, the RMD would be a much larger percentage of the deflated accounts. And while many had already taken the distribution, those who haven't are left at a crossroads: Take the whole distribution? A partial distribution? Or defer the pay-out entirely?
James Daniels, a Tax Partner in UHY's Northeast region, noted the deferral of the withdrawal would mitigate the associated taxes, but only if "an individual will have other sources of income in 2020 that will put them into a higher tax bracket". Those in a lower tax bracket might be worse off next year if they defer the distribution, he said.
And for those who took their income in securities? Daniels said to hold onto the depressed security until the market rebounds, then trade the securities for the equivalent cash value.
For the full article from Financial Advisor Magazine, click here.