The goal of this episode is to make people aware of the options that are out there. We won’t know if this applies to you until we review with you. We also want to say we are not tax advisors and especially not CPAs. Please, if you have any questions or need clarifications call your advisor or a tax consultant.

The Secure Act[1]

There are two main points we wanted to touch on here. First, we wanted to focus on the new rules around Required Minimum Distributions (RMDs.) If your 70thbirthday was on or after July 1, 2019, you do not have to take an RMD until you reach age 72. It does not change the tax implications of the withdrawal. If you are unsure of what your next or new RMD will be call your advisor and we can get you that information. Second, there are new rules with New Inherited IRA. There are a few exceptions but if you inherited an IRA or a 401(k) after January 1, 2020, you can no longer stretch out your distributions. You now must withdraw 100% of the assets within 10 years. This could affect a new account or your estate plan so again call your advisor with any questions.

The CARES Act

Inside the CARES Act, there was a Coronavirus-related relief for retirement plans and IRAs. First and foremost, you have to qualify under the CARES Act as being impacted by the Coronavirus. You generally qualify if you or your spouse tested positive for COVID-19 or SARS-CoV-2, if you experienced adverse financial consequences as a result of being laid off, furloughed, or having work hours reduced, if you were unable to maintain work due to childcare arrangements, or if you had to close or reduce hours of your personal business as a result of the virus. This is more specifically stated on this IRS website. If you qualify then you can take a coronavirus related distribution. That can be a single distribution or multiple distributions that do not add up to more than $100,000 from the 1st of January 2020 to the 30thof December 2020. When you take the Coronavirus distribution it does not have the additional 10% tax due to the early withdrawal penalty. Now here comes the tricky party that we strongly urge you to seek out your tax consultant. If you don’t have one please let us know and we can suggest someone. When you take this distribution, you can file it as income this year or over the next three years. You can also “repay” the distribution back into your IRA or 401(k) and file an amended tax return over the next few years. Additionally, there is loan relief for specific qualified retirement plans. Contact your employer to identify if they are participating as it is optional for them. Under the CARES Act your loan repayments can be delayed for up to a year and your loan limit may be increased. Please keep in mind this is truly a case by case basis.

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Investment Advisory Services offered through Sound Financial Strategies Group, LLC (SFSG), a Registered Investment Adviser. Certain representatives of SFSG are also Registered Representatives offering securities through APW Capital, Inc., Member FINRA/SIPC, 100 Enterprise Drive, Suite 504, Rockaway, NJ 07866 (800)637-3211. SFSG and APW Capital are separate and unrelated companies.
The opinions expressed are those of Sound Financial Strategies Group, LLC (“Sound”). The opinions referenced are as of the date of publication and are subject to change without notice. This information is not a recommendation to buy or sell a particular security or to invest in any particular sector. Forward-looking statements are not guaranteed. Sound reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs, and there is no guarantee that its assessment of investments will be accurate. Information was obtained from third-party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness. This information is not intended to be investment advice and does not take into account specific client investment objectives. Before investing, an investor should consider his or her investment goals and risk comfort levels and consult with his or her investment adviser and tax professional.
Sound is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Sound’s investment advisory services can be found in its Form ADV Part 2, which is available upon request. SFS-20-137

[1] https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds

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