Provided by Pamela J. Sams, CRPC©, BFA™ and NABBW’s Retirement Planning Associate

Are you one of the many retirement account holders who took a mandatory distribution this year?

If so, you may be able to manage the taxes associated with Required Minimum Distributions (RMDs) from traditional IRAs and 401(k)s. There are some essential details to keep in mind, however.

Here’s what you need to know.

Don’t forget the withholding

Thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, those who hold certain retirement accounts can bypass the required minimum distributions for 2020. To do so, though, you’ll need to return the full amount of your RMD to your retirement account. Keep in mind, many retirement account custodians often withhold income tax, which will need to be returned as well—not just the net amount you receive.1

 Remember August 31st

August 31st is the deadline by which you must return your RMD. But considering the widespread disruption caused by COVID-19, it may be wise to begin this process sooner rather than later. After all, with industries shuttering doors or modifying their hours of operation, it may be difficult to contact the various institutions necessary. If you’re not sure where to begin, speaking with your banking or financial professional is always a wise move.1

Avoid the 6%

As many retirement account holders know, accidental excess contributions result in a 6% tax for every year the excess remains in the account. Typically, this is a non-issue for those working with a financial professional. But considering the flurry of changes to the tax code this year, it may be worth checking with your custodian to make sure they have tagged your transaction as a “return of funds.”1

It pays to be sure

These are just some of the most important factors to keep in mind, but the longer you wait, the greater the potential for delay or mishap. In this case, it literally pays to work with your financial, tax, and banking professionals to make sure your RMDs are returned correctly.1

Pamela J. Sams, CRPC©, BFA™ may be reached at (703) 547-8682, pamela@jacksonsams.com, or  www.jacksonsams.com

  • Distributions from Traditional IRAs, 401(k) plans and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
  • The change in the RMD age requirement from 70½ to 72 only applies to individuals who turn 70½ on or after January 1, 2020.
  • Once you reach age 72, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in most circumstances. Workers over 72 can still contribute to an IRA, 401(k) or other retirement accounts, depending on specific circumstances.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting, or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities offered through Securities America, Inc., a Registered Broker/Dealer, Member FINRA/SIPC.  Advisory services offered through Securities America Advisors, Inc., a SEC Registered Investment Advisory Firm, Pamela Sams, Investment Advisor Representative. Jackson Sams Wealth Strategies, Securities America, Inc. and all other entities named are separate entities.

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Citations

  1. IRS.gov, 2020

 

For 19 years, Pamela has been helping women improve their personal and financial wealth through solid financial life planning. Pamela’s education and training enable her to help clients successfully navigate through the myriad of financial decisions they face during their lives. She focuses on helping her clients meet their financial needs and help them work to achieve financial security and greater retirement readiness.

Pamela has become a strong voice in the area of personal finance for women. Her knowledge in this area has made her a sought-after speaker. She has been quoted in articles in various financial publications.

Throughout her financial services career, she has acquired several client service and financial planning awards. She has membership in the Million Dollar Roundtable (MDRT). Membership in MDRT is a highly recognized mark of excellence and limited to only the most successful in the financial services profession. This places Pamela among the top professionals in the global life insurance and financial services industry. Pamela was featured in the Women in Wealth section of Fortune Magazine November 2020 issue as a top Wealth Manager in the Washington DC metro area.

She successfully completed the demanding requirements to receive a Chartered Retirement Planning Counselor certification through the College of Financial Planning. Pamela also holds a Behavioral Financial Advisor designation, awarded to advisors who have undergone training to learn to help clients make financial decisions using a rational, values-based approach. Behavioral Financial Advisor’s integrate techniques founded in traditional finance, psychology and neuroscience to positively influence clients’ spending and saving behavior in the presence of challenging emotions.

Pamela is married, lives in Chantilly, VA and has three children. She devotes her free time to her family, her church, enjoys reading and loves to sing.

Securities offered through Securities America, Inc., a Registered Broker/Dealer, Member FINRA (SIPC). Advisory services offered through Securities America Advisors, Inc., a SEC Registered Investment Advisory Firm, Pamela Sams, Investment Advisor Representative.