Required Minimum Distributions (RMDs) are minimum amounts that you must withdraw from your IRA or retirement plan account each year after you reach age 72 (70 ½ if you reach 70 ½ before Jan. 1, 2020). In a workplace retirement plan, you can delay taking RMDs if you continue working and you’re not a 5% owner of the employer. IRS rules always require you to take RMDs from traditional IRAs, and SEP, SIMPLE, and SARSEP IRAs even if you continue working.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, and the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), made several changes to RMDs in 2020 and 2021.
2020 RMD Waiver: Required minimum distributions (RMDs) were waived for 2020 for IRA and workplace retirement plan account holders, including individuals who:
- Reached age 70 ½ in 2019 and had their first and second RMDs due in 2020, or
- Had their first RMD due on April 1, 2021, for 2020.
2021 RMD: The waiver of RMDs as part of the CARES Act for 2020 was NOT extended to RMDs for 2021. IRA account holders and participants in retirement plans are subject to RMDs for 2021.
If you reached age 70 ½ in 2019, your RMDs due in 2020 were waived. You have a 2021 RMD due by Dec. 31, 2021, based on your account balance on Dec. 31, 2020.
If you reached age 72 in 2021, (and didn’t reach 70 ½ in 2019) your 2021 RMD is due by April 1, 2022, based on your account balance on Dec. 31, 2020. Your 2022 RMD is due by Dec. 31, 2022, based on your account balance on Dec. 31, 2021.
If you’re still employed by the plan sponsor, and not more than a 5% owner, you can delay RMDs from that workplace retirement plan until you retire. RMDs are always required from traditional IRAs, SEP, SIMPLE and SARSEP IRA plans even if you’re still employed.
If you left your job in 2021 and rolled over your workplace retirement plan account into your IRA, the RMD from your IRAs for 2021 won’t be affected by the rollover, but you may have an RMD due from the retirement plan.
- Amounts rolled over to your IRA from a workplace retirement plan in 2021 don’t affect your IRA RMD calculation since 2021 RMDs are based on your IRA account balances on Dec. 31, 2020.
- If you have a 2021 RMD due from your workplace retirement plan, it cannot be rolled over to your IRA.
RMDs: IRA Beneficiaries
Beneficiaries of IRA accounts must follow special distribution rules. The SECURE Act changed how and when beneficiaries must take distributions when the account holder dies after 2019. Under the CARES Act, beneficiaries do not have to take RMDs for or during 2020.
For a 2019 death, life expectancy distributions, if applicable, would generally be required to start by the end of 2020. Since the CARES Act waived all 2020 RMDs, to use the life expectancy option, generally you must begin taking distributions by the end of 2021. If you don’t begin taking life expectancy distributions by the end of 2021, you’ll be required to take a complete distribution under the 5-year rule.
For distributions based on the 5-year rule for deaths prior to 2020, you do not count 2020 as one of the 5 years. You would have until the end of the 6th year following the year of death for deaths in 2015 through 2019.
For a 2020 death, life expectancy distributions, if applicable under the SECURE Act, would generally be required to start by the end of 2021.
For more detailed information on RMDs, see:
Publication 590-B, Distribution from Individual Retirement Arrangements (IRAs)
Publication 575, Pension and Annuity Income