Saving money for retirement in a tax-deferred account has many benefits – but you can only defer taxes for so long before they must be paid, which is why U.S. tax law requires a Required Minimum Distribution (RMD). An RMD is the amount of money that must be withdrawn annually from a tax deferred account (including traditional IRAs, Simplified Employee Pension (SEP) IRAs, and Simple IRAs) once the owner reaches a certain age. RMDs are taxed as ordinary income.
Recent legislation, including the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act have created significant changes to RMDs – some of which are ongoing, and some of which are unique to 2020.
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