Coronavirus stimulas relief law waives rmds for 2020

Normally, RMDs cannot be converted to Roth IRAs, but now since there are no RMDs, you can withdraw IRA funds at low values and low tax rates and convert them to your Roth IRA. Yes, you pay

taxes on the conversion, just like you would have on your RMD. But your RMD could not be converted to a Roth, so even though you paid the tax, you could not get the conversion benefit. Now,

under this 2020 RMD waiver period, you can get more for the tax you pay by being able to convert the funds you withdraw to your Roth IRA at a relatively low tax cost. THERE ARE SEVERAL

ADDITIONAL BENEFITS TO THIS: * First, any amount converted removes those funds from your IRA, lowering the balance that will be subject to future RMDs, and in turn lowers your income and tax

bill for future years. Lowering your income in the future could also lower the tax on your Social Security benefits and lower your Medicare IRMAA (income related monthly adjustment amount)

surcharges. * In addition, once the funds are in your Roth IRA, there are no more lifetime RMDs, and anything you withdraw will likely be tax free. The Roth funds will also pass income

tax-free to your beneficiaries. * Converting now when market values have dropped will mean that any future rebound will now accumulate tax free to you in your Roth IRA. If the market

rebounded while the funds remained in your traditional IRA, then those gains would be eventually taxed. The key factor in deciding whether to convert or not is the tax rate you are at now

compared to what future tax rates might be. If you expect your future tax rate in retirement to be the same or higher, it pays tax-wise to convert. Given the astounding $2 trillion dollar

stimulus bill, it's now more likely that tax rates will have to increase soon. This may be another reason to take advantage of this one-time opportunity to move what would have been

your RMD into a tax-free Roth IRA. WARNING: ROTH CONVERSIONS CANNOT BE UNDONE Of course, you should examine your own situation and review it with a professional tax or financial adviser,

because once you convert to a Roth IRA, it cannot be undone. The tax will be owed. Roth conversions are permanent. CHARITY BENEFIT Even though RMDs are waived, you can still use your IRA to

get a tax break on giving to charity. If you normally give to charity, do it with qualified charitable distributions (QCDs) from your IRA. The funds are directly transferred from your IRA to

a charity and excluded from income. If there were RMDs, this would go towards satisfying the RMD, but even if there are no RMDs this year, this is a better way to give to charity and reduce

your taxable IRA balance at the same time. Only IRA owners and beneficiaries who are age 70 1/2 or older qualify for this, though. This age did not change even though the age for RMDs was

increased to 72. If you don’t do a QCD, your only charitable deduction is likely to be the new $300 above-the-line deduction created by the bill. (Above-the-line means it comes before you

calculate your adjusted gross income). Otherwise, you probably will get no benefit from your donations, since most people take the standard deduction. QCDs give you back a tax benefit that

would otherwise be lost. QCDs are another reason to withdraw from your IRA, even if you don't have to. If there is any downside at all to this RMD relief, it's that, unfortunately,

anyone who needs the funds and takes the RMD anyway will not benefit. According to the Treasury's own numbers, they estimate that roughly 80 percent of IRA owners take more than the

minimum, so this relief will not help a majority of those who rely on their retirement savings for annual income. BOTTOM LINE: RMDs due for 2020 are waived, but you can take them if you need

the funds or to take advantage of the tax planning opportunities opened for this year. _Ed Slott, CPA, is one of the nation's top experts on retirement plans. For more than 30 years,

he has educated both consumers and financial advisors on retirement tax-saving strategies. Most recently, he published _Ed Slott's Retirement Decisions Guide: 2020 Edition_ and is the

host of several popular public television specials, including his latest, _Retire Safe & Secure! With Ed Slott_. Visit www.IRAHelp.com to learn more._