IRS Makes It Easier to Undo This Type of Retirement Withdrawal

Happy retired couple
Photo by sirtravelalot / Shutterstock.com

The IRS has good news for those who already took a required minimum distribution, or RMD, this year but now are having second thoughts.

Earlier this year, passage of the federal Coronavirus Aid, Relief, and Economic Security Act, better known as the CARES Act, gave taxpayers the option to skip taking an RMD from their individual retirement account or defined-contribution retirement plan, such as a 401(k) or 403(b) plan, in 2020.

What if you already took an RMD this year? The IRS says you can roll the money back into a retirement account, and that the 60-day rollover period for RMDs taken this year has been extended to Aug. 31.

In addition, IRA owners or beneficiaries who have received a distribution from an IRA “of an amount that would have been an RMD in 2020” can repay the distribution at any time up to Aug. 31.

The IRS notes that the new rule also applies to anyone who turned age 70½ in 2019 and thus would have had to take their first RMD by April 1, 2020.

What is a required minimum distribution?

An RMD is a minimum amount of money that Uncle Sam requires you to withdraw from most types of retirement accounts each year once you reach a certain age.

Fail to take an RMD in full and on time, and the IRS will hit you with a steep fine, as we detail in “Beware These 3 Tax Penalties on Retirement Accounts.”

Previously, everyone subject to RMDs had to start taking them for the year in which they turn 70½. The federal Secure Act of 2019 increased that age to 72 for people who turn 70½ after Dec. 31, 2019.

Normally, the deadline for your first RMD is April 1 of the year after you turn 70½ or 72, depending on your situation. After that, your RMD deadline is always Dec. 31.

How to get your retirement on track

The government’s decision to let people skip their 2020 RMD is a big deal for retirees who want to avoid paying taxes on distribution while also letting their money continue to grow. Financing your golden years can be a tricky endeavor, so any help from Uncle Sam is welcome.

If you’re looking for tips on how to build and maintain a nest egg, check out “Your Top 5 Retirement Questions, Answered.”

If you are still working, but retirement is just over the horizon, consider enrolling in our retirement course. It’s a 14-week boot camp with everything you need to plan the rest of your life, know you’ll have enough money and make your retirement dreams a reality.

The course is intended for those who are 45 or older, and can teach you everything from “Social Security secrets” to how to time your retirement.

For more on the course, check out The Only Retirement Guide You’ll Ever Need.

Find the right financial adviser

Finding a financial adviser you can trust doesn't have to be hard. A great place to start is with SmartAsset's free financial adviser matching tool, which connects you with up to three qualified financial advisers in five minutes. Each adviser is vetted by SmartAsset and is legally required to act in your best interests.

If you're ready to be matched with local advisers who will help you reach your financial goals, get started now.

Read Next
5 Common Medical Expenses That Medicare Won’t Pay For
5 Common Medical Expenses That Medicare Won’t Pay For

Don’t let these health care costs catch you off guard in retirement.

This Chase Card Is Great for Groceries and Cash Back on Everything
This Chase Card Is Great for Groceries and Cash Back on Everything

You could earn more than $600 cash back in your first year just from grocery shopping.

5 Medicare Mistakes to Avoid for a Healthy Retirement
5 Medicare Mistakes to Avoid for a Healthy Retirement

Medicare can be confusing. Beware these missteps — which can hike your costs.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

7 Common Online Shopping Mistakes That Will Cost You
7 Common Online Shopping Mistakes That Will Cost You

How many of these costly online shopping missteps are you making without realizing it?

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

Eat This Food If You Want to Avoid Alzheimer’s Disease
Eat This Food If You Want to Avoid Alzheimer’s Disease

One type of food associated with the Mediterranean diet offers especially large benefits.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less
5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less

In this week’s podcast: tips on retiring overseas — from someone who’s been helping American expats for decades.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.