Some Things Can Be Undone

By Eric Ellis | March 31, 2020 | RMD


I knew I should have put my wife’s make-up away.

Kate had been eyeballing it all weekend and I noticed it while I was getting ready for work. Being late is not my style so I had to leave. A few minutes later I get a text message of my beautiful daughter Kate who had applied her own make-up. She is three. Thankfully my wife has a great sense of humor, if she didn’t this may have been one of those times where I needed a reset button.

Congress has recently created a reset button of its own.

The CARES Act suspends Required Minimum Distributions (RMD) for 2020. Taking the “R” out of RMD. This applies to IRAs (SEP, SIMPLE, and Traditional), 401(k), 403(b), and 457(b) plans. Suspended RMDs also apply to beneficiary IRAs, as long as you haven’t taken your RMD yet. What it boils down to is this: if you do not need or want to take your RMD for 2020 you do not have to.

What are the Benefits by Not Taking Your RMD?

Lower Taxes

By not taking your RMD you are not making a taxable withdrawal from your retirement account. You are avoiding taxes on the amount you would have normally withdrawn. For example, assuming you are in the 24% tax bracket and your RMD was $10,000 for 2020. If you take your RMD the resulting tax consequences would be $2,400 ($10,000 x 24%) and you would take home $7,600 ($10,000-$2,400 = $7,600). If you choose to not take your RMD in 2020, you would avoid the $2,400 in taxes created by your withdrawal.

More of Your Resources Stay Invested

Not taking your RMD will leave more of your resources invested. More resources invested means more resources to participate in the recovery. This can be tricky because RMDs are only suspended for 2020. Assuming RMDs in 2021 must be taken. To be fair this could be an advantage or a disadvantage. No one knows how your investments will perform over the next 12 months. If you have a positive outlook and are correct, not taking your RMD would allow your retirement accounts to recover more quickly.

What If I Have Already Taken My 2020 RMD?

You can return your RMD if you’ve already taken it for 2020. There are two paths you can take.

Under 60-days 

If your RMD was taken within 60-days you can simply deposit the withdrawn funds back into your retirement account. This does count as a rollover and you are only allowed one rollover per year due to the clearly stated once-per-year rollover rule. If your RMD was taken more than 60-days ago or you have already used your once a year rollover there is a second option.

Over 60-days

As long as you qualify as being directly impacted by the Coronavirus you can deposit your withdrawn amount into your retirement account. The CARES Act defines an impacted person as:

  • Diagnosed with COVID-19 or have a spouse or dependent diagnosed with COVID-19.
  • Experience adverse financial consequences as a result of being quarantined, furloughed, being laid off, or reduced work hours due to COVID-19.
  • Unable to work due to lack of childcare as a result of COVID-19.
  • Own a business that closed or operated under reduced hours because of COVID-19.

Unfortunately, non-spousal beneficiary IRAs that have already taken an RMD in 2020 and your 60-day window has expired then you are not eligible to suspend your 2020 RMD.

You may not need a reset button like when Kate did her own make-up. If you do, now you know your options.


Eric Ellis
Financial Advisor
Ellis & Company Retirement Strategists



¹Coronavirus Aid, Relief, and Economic Security Act or CARES Act
The opinions expressed here are those of Eric Ellis and not necessarily Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. All investing involves risks, including the possible loss of the principal amount invested. No investment strategy can guarantee your objectives will be met. The S&P 500 is an unmanaged index of 500 widely held stocks that are generally considered representative of the U.S. stock market. It is unmanaged and cannot be invested into directly.
Ellis & Company Retirement Strategists, Kathy Ellis, CFP® professional CERTIFIED FINANCIAL PLANNER™, professional Raymond James Financial Services, Inc. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
Raymond James, Ellis & Company Retirement Strategists, and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

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