It took me 3½ years of law practice (40 years ago) to conclude that was not the best way for me to help people. But I am still thankful I spent the time and money to get my doctorate of jurisprudence. It is a great background for financial advisory practice.
Recently I spent four hours each on four different days for my annual continuing legal education requirements through the KC Estate Planning Symposium. UMKC’s Daniel Carroll and his staff along with a dedicated committee of volunteer CPAs, attorneys and financial leaders do extremely well on this every year. Since it had to be all online this year, the result was incredible in quality and technology.
So today I am sharing with you a few recent changes that may affect your personal or business finances. Disclaimer! The following is general in nature. You may not rely upon it for your personal decisions. If you DIY and mess up, you may not sue me. Or should I say, you should not be able to sue me? Take the information and get help from your favorite tax and/or legal advisor. They earn every dollar they charge.
1. Required minimum distributions. In December, the SECURE Act moved the age for RMDs to the calendar year you become 72. Plus, the CARES Act took pity on you for your Covid-19 market losses – no one needs to take an RMD in 2020. If you already withdrew it, you can put the amount or any part of it back in. This includes beneficiaries of inherited IRAs.
2. Retirement plan participants. If you get the virus or lose income because of business conditions (layoff, quarantine, lack of child care, etc.) you may take a hardship distribution from your account and you can avoid tax on the money if you repay it within three years. Loans from plan accounts are increased to $100,000 maximum.
3. Qualified charitable distributions (QCD) are still allowed for those who are or become 70½ in 2020. If you are the least bit charitable, this is extremely beneficial for those who cannot itemize deductions on a Form 1040. But see #4 below.
4. If you are 70½ or older and still earn income (W-2 or self-employment), you may now make tax-deductible contributions to a traditional IRA. However, if you ever want to take advantage of QCDs for charitable giving, never, never, ever, ever contribute money to a traditional IRA after 70½!
Why? Trust me. There is an awful penalty procedure to calculate how bad you have been to do both of these. It will cost you more than it was ever worth, at least in aggravation. Instead, satisfy your saving craving by adding money to a company retirement plan or a Roth IRA, just not a Traditional IRA.
5. The bad news: If you are reading this and therefore did not die before Dec. 31, you may no longer distribute your remaining retirement plan (or IRA) funds to non-spouse beneficiaries using lifetime payments. The general rule now requires all funds to be paid out within 10 years. (Besides one’s spouse, another major exception exists for children disabled as defined by Social Security for aid.)
As one would hope, 16 hours of screen time yielded quite a bit of useful information. I will share more of it in coming weeks. I hope you are taking advantage of any time saved during the pandemic to plan and create a better future for yourself and your family.
Ron Finke is president of Stewardship Capital in Independence. He is a registered investment adviser. Reach him at firstname.lastname@example.org.