A traditional Individual Retirement Account (IRA) is subject to rules that require withdrawals, known as Required Minimum Distributions (RMDs) at age 72. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (‘‘CARES Act”) was enacted in response to the coronavirus pandemic. Under the CARES Act, RMDs for IRAs are waived for calendar year 2020.
For IRA owners who have been taking annual RMDs you do not have to withdraw an RMD for 2020. For IRA owners who turned 70½ in 2019 but deferred the first RMD to April 1, 2020 you do not have to withdraw the delayed 2019 RMD in 2020. Plus, you do not have to withdraw an RMD for 2020.
What about inherited IRAs? Both traditional IRAs and Roth IRAs have RMDs applicable to the beneficiary after the owner’s death. The waiver of 2020 RMDs applies to beneficiaries of inherited IRAs. If you have not yet taken your 2020 RMD, you don't have to.
Some IRA inheritors must take distributions under the so-called 5-year Rule.” Under the 5-Year Rule, the IRA must be completely distributed by December 31 of the year of the fifth anniversary of the owner’s death. The 5-Year Rule does not require any distributions for the first four years after the original owner’s death. The 5-Year Rule applies if an IRA owner dies before his “Required Beginning Date” and there is no “Designated Beneficiary.” Under a provision contained in the CARES Act, if a retirement plan owner died and the beneficiaries who inherit the plan are required to withdraw the plan balance under the 5-year Rule, that 5-year deadline can ignore 2020, which effectively makes it a 6-year rule.