RMDs Are Back in 2021

The passing of time during the pandemic has felt very weird at best. For me, it felt like 2020 moved at a snail’s pace and 2021 has been a bit of a blur. And, it’s caused me to forget exactly when certain events happened. Thank goodness for time stamps on the pictures on my phone!

One of the things that we have seen some investors forget about is Required Minimum Distributions from IRAs (and other retirement plan types). The requirement was waived in 2020 due to the pandemic and the market crash in March of last year. So, many folks may forget that the requirement has in fact returned for 2021. Fear not, you have 8 business days left in the year!

Further muddying the waters of who has to withdraw and when is the required age changed from 70.5 to 72, AND the rules for non-spouse inherited IRAs changed (when the SECURE act became law). Here is a summary of the current rules:

  1. If you turned 70.5 in 2019, then the “old” (no pun intended!) rule applies; meaning you did not have to take a distribution in 2020, but you do have to in 2021
  2. If you turned 70.5 in 2020 or later, you must take your first RMD at age 72 (technically, by April 1 of the year after you reach 72 for the first distribution)
  3. If you are a non-spouse beneficiary (i.e., a child) of an IRA whose owner died on or before December 31, 2019, you must take a distribution each year based on your life expectancy
  4. If you are a non-spouse beneficiary of an IRA whose owner died after 12/31/2019, then you are required to withdraw the entire balance within 10 years of the date of death

I think what is most interesting/impactful is the last change. Note that there is no requirement to withdraw every year, but all the money has to be out of the IRA in 10 years. So, the recommendation for most would be to take out some each year in order to spread out the tax liability. If there is significant growth in the IRA and/or not enough was withdrawn leading up to the 10th year, a large taxable distribution may have to occur to fully empty the IRA. If you are someone who is already earning income, that taxable amount would be stacked on top of what you’ve already earned for the year.

I believe we have disclaimers at the bottom of all our blogs, but certainly every situation is different. Generally, the most important thing is to spread out the tax impact as much as possible.

Fortunately, RMDs can be planned for (or even donated via Qualified Charitable Contributions or QCDs). What cannot necessarily be planned for are emergency roof repairs, which we at Meridian experienced earlier this month. Our metal office roof folded like a taco during a particularly strong windstorm. It was a bit unnerving to say the least, but fortunately no one was hurt, and we were able to get a temporary fix in place.


Here’s to your holidays going as you planned them! Merry Christmas to you and your families!


Nathan & Your Meridian Team

Categories : Financial Planning

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