Navigating the New Rules of Retirement

Whether planning to retire or enjoying retirement now, there are no shortages of financial opportunities!

The latest SECURE and CARES Acts provide new opportunities yet add layers of complexity. It’s our job to manage complexity, so we’ve highlighted a few of the most impactful changes below.

Typically, if annual RMDs are not withdrawn from IRAs, you face a 50% tax penalty. However, with the CARES Act, RMDs are not required for retirees in 2020. Delaying your RMD can be beneficial by lowering your tax liability. When you withdraw funds from retirement accounts, you increase taxable income, possibly increase your tax bracket and expose more of your social security to tax.

In 2019, RMD rules impacted anyone over age 70.5. In 2020, the SECURE Act changed the age requirement to 72 years or older. So, what if you just turned 70.5 and have not yet begun your RMDs? There is still opportunity to adjust and delay RMDs until you reach 72. Contact us for more information.

Another opportunity exists at age 70.5 with the ability to make Qualified Charitable Distributions (QCDs) from your IRA. By utilizing QCDs, you can avoid taxes on your RMDs. The Act didn’t change the 70.5 age benefit for QCDs. As such, a loophole exists for every IRA owner between the age of 70.5 and 72 that will contribute to a church or charity. QCDs, while not required, are a great way to benefit yourself while making the world a better place.

The CARES Act also provides benefits to those not yet retired. Instead of paying a 10% penalty when taking a distribution from your 401(k), participants under 59.5 can withdraw up to $100,000 penalty-free in 2020.

Rapid tax law changes can be difficult to stay on top of. Every day, our Team at Buttonwood considers opportunities for each of the multigenerational families we work with. Schedule an informal conversation with one of our Advisors today to learn more about our Family CFO services.

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