That's so not 2020!

August 21, 2020

Despite all of the bizarre things occurring in 2020, there is one area, for retirees in particular, to benefit from the current year. 

Many people in the Required Minimum Distribution (RMD) aged crowd were unable to benefit much from Roth IRAs back in their prime working years because Roth IRAs were only established in 1997.

Well here is an opportunity to change that!

Because of the Secure Act, passed in December 2019, and the Cares Act, passed in March 2020, we have two important details that create an opportunity for RMD aged people:

1) Non spouse inheritors of retirement accounts must fully redeem them within 10 years of inheriting due to the Secure Act (see blog from 1/2020).

2) RMDs of all types have been postponed for 2020 due to the Cares Act.

Put these together and in 2020 you have a situation where IRA (RMD) monies can be converted to a Roth IRA starting with the first dollar withdrawn. In a normal year, only monies above the RMD amount can be converted to a Roth IRA.

The significance of this is that people can pay taxes to convert at likely a lower rate than normal given that they don't have to pull their RMD amount. This will allow tax free growth potential for themselves and also for their beneficiaries. When the beneficiary inherits the money, they will still be required to fully redeem the account within 10 years but will be able to do so without paying any taxes due to the tax-free nature of a Roth. In addition, converting IRA monies to a Roth will also reduce the future RMD amounts on the current retiree because the balance will be smaller and Roth IRAs do not have these distribution requirements.

As you can see, a Roth conversion is surely not 2020... yet it is!

If you'd like help with this topic or others, please call or email one of our talented CFP certified advisors who are daily, proactively putting our financial expertise and resources to work for our clients.


This is meant for educational purposes only.  It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions.  (08/20)