The CARES Act: Changes to RMDs and Medicare
Note: This is the final installment in our newsletter series covering the many programs affected by the CARES Act. We previously covered benefits for self-employed workers and small business owners, and later sent out information regarding student loans. We want to thank you again for the great feedback we’ve received, and invite you to share this information with others who may find it helpful.
This last letter covers changes to Required Minimum Distributions that may open up doors to reduce tax liability, as well as new Medicare coverage enacted through the CARES Act.
This week has brought a whirlwind of new information regarding the CARES Act, and we are excited to share our final newsletter addressed to RMD recipients and Medicare enrollees.
You Can Skip Your 2020 RMD
If you are 70 ½ or older and have an IRA, 401(k), or other qualified account, you are familiar with the yearly requirement that you take a certain amount out of your account each year. The amount you take is calculated based on the account’s value as of December 31st of the prior year. Due to market volatility, you may be taking out a bigger portion of your account than you would have if the market were more stable, so Congress waived that requirement for this year.
It’s important to note that although this requirement has been waived, we’ve heard from most companies we work with that they will continue to process any automatic RMDs you may have set up. Therefore, if you would like to skip your RMD for this year, please get in touch with us so we can put a note on file.
If you have already taken some or all of your RMD for 2020 and are interested in putting that money back, please contact our office and we can look into whether that is an option for you. While you are no longer required to take a minimum amount from your qualified accounts, you can absolutely continue to take voluntary distributions, including charitable giving.
As you may recall, we sent out information toward the beginning of the year regarding changes to inheritance of qualified accounts. The SECURE Act’s changes apply to IRAs and other qualified accounts inherited in 2020 and beyond. Rather than stretching income over their lifetime, now most beneficiaries will need to take the entire account out within 10 years. The suspending of RMDs may create estate planning benefits for IRA owners who convert some of their account to Roth money in 2020, which has them pay income tax on the funds, but will allow their beneficiaries to access that money tax-free over their 10-year beneficiary cycle.
Implications for Inherited IRAs
RMDs for inherited accounts have also been canceled, but unlike traditional RMDs, if you have already taken funds out you will not be able to put them back into the account. Our accounts at TD Ameritrade do not have automatic RMDs set up, so if you had yet to take your RMD, it will not come out to you automatically. Please contact our office if you would like to take funds out and we can get that set up for you.
Medicare Changes Due to Coronavirus
If you have Medicare Part D coverage, a new provision through the CARES Act requires your pharmacy to give you a 90-day supply of your medications if you request it, to ensure you have enough supply if you need to quarantine. Medicare beneficiaries will also be able to receive the COVID-19 vaccine for free once it becomes available.
In the past, Medicare has required doctors to have face-to-face or video conference visits with their patients. However, healthcare providers are concerned about bringing healthy and sick patients together, and patients are trying to stay at home as much as possible. For the first time ever, Medicare will allow some doctors to have phone-only visits with their patients.
We hope you and your loved ones remain safe and healthy, and look forward to speaking with you soon.