Retirement Savings and the Stimulus Bill: Your Questions Answered
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What is the main topic discussed in this episode?
Here's your money briefing for Friday, April 10th. I'm J.R. Whelan for The Wall Street Journal. The $2 trillion stimulus package changed several rules for retirement accounts. Wall Street Journal listeners and readers had a lot of questions about the changes, like what happens if you took a mandatory withdrawal from an IRA before the new rules.
If you take an amount out of your IRA or your 401k, you actually have a 60-day period in which you can put that money back and it doesn't become a taxable distribution.
That's retirement reporter Ann Tergesen. Coming up, she'll also discuss the rules about withdrawing assets as stock and whether you can convert a distribution to a Roth IRA.
Despite this week's market rally, stocks are still down about 20 percent since mid-February. If you've got retirement savings, that's a good reason to leave it untouched as the market recovers.
What pandemic-related changes did the $2 trillion stimulus package make to retirement account rules?
But when Congress included rules in the stimulus package about mandatory withdrawals, that raised a lot of questions from journal subscribers. Here with some answers is Wall Street Journal reporter Ann Tergesen. So, Anne, what is the IRS allowing people to do who took distributions from their IRA before the new rules were adopted during the pandemic?
During the pandemic, due to the pandemic, Congress has decided to suspend required distributions, RMDs, from retirement accounts for people who are retired, who are over the ages at which those start, which is usually 70 1⁄2 or 72, depending on your birthday.
How did the IRS extend the 60-day rollover deadline for required minimum distributions?
So if you're in that category... you're required to take distributions from your retirement accounts. But for this year, Congress is saying you don't have to take those distributions. And the reason being that when the market's down, taking money out can usually exacerbate, obviously it's going to exacerbate the decline in your account balance. So what happened on Thursday is that the IRS gave people who have already taken required distributions for part of this year, they gave them sort of an extension on their ability to put the money back. It's all very complicated. All this stuff is kind of complicated. Normally, if you take money out of an IRA, you have a 60-day window to put it back in without paying any taxes.
What are the rules for returning required distributions taken as shares of stock from IRAs?
So people who took RMDs already this year who maybe don't want to take that money out now that they don't have to, they can choose to put the money back in and under normal terms, they would be constrained to that 60-day deadline that they would have to put it back in by. What the IRS did on Thursday is it said that anybody who took money out, took an RMD from February 1st on, has until July 15th to put that money back. So that's sort of an extension on the normal 60-day deadline that they require people to put that money back.
What if people withdrew assets in the form of stock?
Yeah, I got some emails from a couple people who asked about that. So it's a little bit complicated.
How do 401(k) rollover rules differ when distributions were taken in stock versus cash?
All these rules are very complicated. So if you took your required distribution in the form of taking shares of stock out of your IRA, with IRAs, you actually have to put back the same kind of property you took out. So if you took out shares, you have to return shares. So that means if you took out 100 shares of AT&T, you've got to put 100 shares back.
Are beneficiaries, including inherited-account spouses and non-spouses, covered by the RMD suspension?
If you actually took out 100 shares and then sold the stock, you can't put cash back. So if you took cash out, you can put cash back. If you took shares out, you can put shares back.
How does that apply to 401ks?
In that regard, 401ks are more flexible. And if you took out shares, they let you put back cash.
Now, our subscribers had a lot of questions about people who have inherited retirement accounts.
How does suspending RMDs affect the ability to convert distributions to a Roth IRA?
The question is whether they're covered by the suspension of required distributions. And the answer is yes, they are. But it gets more complicated if you're a beneficiary who has inherited an account and you've already taken your required distribution for this year. Can you put it back? And in that case, it depends. If you're a spouse who has inherited an account, yes, you can, as long as you can do so within the 60-day rule.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:05–1:04
2
What pandemic-related changes did the $2 trillion stimulus package make to retirement account rules?
1:04–1:41
3
How did the IRS extend the 60-day rollover deadline for required minimum distributions?
1:41–2:23
4
What are the rules for returning required distributions taken as shares of stock from IRAs?
2:23–3:05
5
How do 401(k) rollover rules differ when distributions were taken in stock versus cash?
3:05–3:26
6
Are beneficiaries, including inherited-account spouses and non-spouses, covered by the RMD suspension?
3:26–3:49
7
How does suspending RMDs affect the ability to convert distributions to a Roth IRA?
3:49–5:11
Speakers
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