What is new for Required Minimum Distributions (RMDs) in 2021? I am glad you asked. However, before we get to that, there might be a handful of diligent readers of this blog that are now asking themselves, “Hey, Blogger, what is an RMD?” Again, I am glad you asked. An RMD is an amount that must be withdrawn from a retirement account when you reach a certain age. It’s not much more complicated than that, but there are some additional things to consider which we will address later.
I think that many can attest to the fact that 2020 was a unique year in many ways. In an effort to help taxpayers, the CARES act enabled any taxpayer with any RMDs in 2020 to skip the distribution. Many of our readers may have elected to skip their RMDs for 2020, or even after receiving their RMDs, were able to roll those funds back into their retirement accounts, provided those funds were returned within a 60-day roll-over period. These steps taken allowed taxpayers to delay the taxable event associated with taking any RMDs. The CARES act was only limited to RMDs that otherwise would have been required in 2020.
For 2021, all RMDs are again required to be distributed. We want to remind all of our readers that if you normally received any RMDs in years prior to 2020, and elected to skip or roll-over any RMDs in 2020, your RMDs need to be distributed again as required.
The IRS publishes a table called the Uniform Lifetime Table. This table, or more correctly, tables, calculate the percentage of money that must be distributed to an account holder based on their age. There are different tables based on if you are married, the age of your spouse in relation to you, if you’re a survivor, or if you are single. RMDs are also affected by the type of retirement plan; for example, is the plan an IRA, an inherited IRA, an inherited ROTH IRA, a 401(k), etc. Each plan adheres to a different table. The plan administrator of your retirement account takes your age, looks up in the table the factor assigned to your age, multiplies the amount in your retirement account by the factor, and PRESTO, that is you RMD for the year.
So again, as a reminder, if you have an RMD for 2021, do not forget to request your distribution.
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