What do I need to know about the new RMD rules?

  • When do the new RMD Rules start?
  • Do I need to take my RMD if I turned 70 1/2 before 12/31/2019?
  • Do I need to take my RMD if I turned 70 1/2 on or after 1/1/2020 but already took my RMD in 2019?
  • When do I need to take my RMD under the new tax law?
  • What is the latest I can take my RMD under the SECURE Act?
  • Tell me what I need to know about RMD’s and the new tax law known as the SECURE Act?

Nothing has changed for Required Minimum Distributions (RMD), if you were 70 1/2 before 1/1/2020 (born before 7/1/1949).  You must take your RMD for 2019 and 2020 and 2021 just like before the SECURE Act added the new rules.  As an example, Craig turned 70 1/2 on December 29, 2019.  He was required to take his first RMD by 12/31/2019 because he is under the old law.  Under a special, one-time rule, he could delay that first payment until 4/1/2020, but he would still be required to take his 2019 RMD by 4/1/20, and he is still required to take his 2020 withdrawal by 12/31/2020, and so on.  He is unaffected by the new RMD rules that changed the starting age to 72.

If you were not 70 1/2 by 12/31/2019 then you hit the RMD deferral bonanza!  Your first RMD will not be required until the year you turn 72.  Which means you can delay your first RMD withdrawal until April 1st of the year you turn 73.  That may not be in your best interest because you would be required to take both the distributions that year but your financial advisor can help you navigate that tax planning opportunity. If Craig was born July 29, 1949, he was just shy of 70 1/2 on 12/31/19, so the new rules do apply to him. He will need to take his first RMD in the year he turns 72, or 2021. That first RMD may be delayed until 4/1/2022, but he does still have to take a 2022 distribution by 12/31/2022.

Ensuring you follow these rules is critical.  Making a mistake can cost you a 50% penalty on what you should have withdrawn.  We calculate and manage the RMD process for our clients to ensure they have complied with these rules including reinvesting the withdrawals into additional tax-free investments.

For more information, please email us at invest@peakeadvisors.com

Chesapeake Financial Advisors is a fee-only financial planning, investment advisory and tax planning firm with offices in Towson, Columbia, and Frederick, Maryland.

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