SECURE ACT 10-YEAR RULE AND CARES ACT RMD ROLLOVERS: TODAY’S SLOTT REPORT MAILBAG

Thursday, April 23, 2020

By Ian Berger, JD
IRA Analyst
Follow Us on Twitter: @theslottreport

Question:

Did the SECURE Act change the rules for designated non-spouse inheritors of a Roth IRA? I believe they used to be able to take distributions based on their life expectancy. Does the 10-year rule also apply to Roth IRAs?

Thanks,

Dave

Answer:

Hi Dave,

Yes, the SECURE Act did change the payout rules for most beneficiaries if the IRA owner dies in 2020 or later. With certain exceptions, most beneficiaries cannot stretch out required minimum distributions (RMDs) over their lifetime like before. Instead, they must receive the entire IRA by December 31 of the 10th year following the year of the IRA owner’s death.

However, the following beneficiaries can still use the stretch: surviving spouses; minor children (while they remain minors); disabled individuals; chronically-ill individuals; and individuals no more than 10 years younger than the IRA owner. The 10-year payout rule also applies to Roth IRA beneficiary distributions.

Question:

Hello,

In February, I took my RMD for 2020 from my traditional IRA. Then the CARES Act came along. Now I would like to make this same amount go into my Roth IRA instead, leaving the taxes paid exactly as is. Can I do this with my broker who holds all accounts? It is probably beyond the 60 days mentioned in the Act.

Thanks,

Tom H.

Answer:

Hi Tom,

You are in luck. RMDs usually cannot be rolled over or converted to a Roth IRA. However, the CARES Act waived 2020 RMDs. So, any RMD already taken in 2020 is not considered an RMD. This means your RMD can be rolled over (i.e., converted) to a Roth IRA – as long as it meets the usual rollover rules.

One of those rules requires that a rollover be done within 60 days of receipt of the distribution. But the IRS recently said that if you received a distribution between February 1, 2020 and May 15, 2020, you have extra time – until July 15, 2020 – to roll it over.

Post Views: 2

Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to [email protected] for approval.

For white papers/other outflow pieces:

Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:

Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:

Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at [email protected] or (516) 536-8282 with any questions.