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May Wine Talk: The CARES Act - How it Affects Retirement Accounts

There are a few aspects of retirement accounts that are affected by the CARES Act, which we feel are very important to address.  Additionally, there are a few strategic ways to look at how this may be beneficial to you if you own any type of retirement account.  We also take a look at some aspects of beneficiary designation on IRAs.

Required Minimum Distributions (RMDs) have been waived for 2020. If you turned at least 70 1/2 in 2019, you would normally be required to take a distribution in 2020; however, this act erases that requirement.  Additionally, if you have taken money out of your IRA after February 1, 2020, you have the option to roll it back into your IRA until July 15, 2020.  If you had been planning on taking your RMD this year and were planning on paying the tax on it anyway, you may want to consider converting it into a Roth IRA instead.

There are a few distinct advantages to funding a Roth IRA.  While the taxes would be due for the year converted, any earnings in the Roth IRA are tax-free.  This extends not only to you but to any beneficiaries to your Roth IRA.  Another advantage is that there is no RMD.  

There are two types of beneficiaries:  Spousal beneficiaries and non-spousal beneficiaries.  Typically the spouse is the primary beneficiary, and other family members become the beneficiary after the death of the survivor.  There is an option in a beneficiary designation called "Per Stirpes."  Per Stirpes indicates that the beneficiary money goes to the children of the named primary beneficiary rather than being allocated to the other named primary beneficiaries.

Given that beneficiary designations take precedence over estate plans, now may be a good time to do a beneficiary audit on all retirement accounts and make sure the beneficiary designations are as you intend.
*This information is not designed to give specific legal or tax advice.  We will always encourage you to speak with your legal cousel, accountant, or financial planner before taking any action.

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