The CARES Act and Your Retirement: What You Need to Know Now

“Kimberly, like many folks our age, my wife and I have been doing a lot of thinking over the past few weeks as this whole coronavirus situation has played out. It’s a scary time for retired folks like us: in our mid 70s and both with a few underlying health conditions. We’ve been managing our health just fine up until now, but with COVID-19 circulating so freely, we’re a lot more anxious and careful than we used to be.

“We’ve saved some money through the years and you have been a great steward for our money; we are grateful for your guidance in the challenging times as well as the good times. And because of your help and financial advice, we’ve been able to enjoy cruises and other vacations pretty much when we wanted. But with everything that’s going on now, we’re rethinking a lot of things. It seems like this year, we should to scale back on some things to be prudent. What would your recommendations be to reduce some items now so we can thrive again when the sequester-in-place is lifted?”

Over the last 30 days or so, I’ve had variations of this conversation with some of my retired clients. With the passage of the $2.2 trillion Coronavirus Aid, Recovery, and Economic Security (CARES) Act, it’s important to put plans in place that can give you more peace of mind during these unsettling times.

Here are some important points for my retirees to keep in mind as you think about how the CARES Act affects your planning for this year.

1. No required minimum distributions (RMDs) required for 2020.

One provision of the CARES Act stipulates that those who are normally required to take RMDs from retirement accounts may choose to skip this year. Why is this a good thing? Let me give you an example that is typical of many of my thriving retirees:

RMDs are calculated based on account balances at year-end, and 2019 was a pretty good year in the markets. So, one of my clients’ RMD for 2020 came out to just over $108,000. But then, as we all know, the markets dropped sharply in February and March, reducing the account balance. If that same RMD were calculated on the present balance, it would be only about $94,000. That means that if he decides to suspend the RMD for this year, it could save him almost $15,000 in taxable income. Not only that, but he’ll get the tax-deferred compounding effect on that money in the account for another year, instead of having to pay taxes on it. And by the way, this also applies to those who have inherited IRAs and other retirement accounts; they can skip their RMDs this year, too.

Of course, if you need to take your RMD as usual in order to have sufficient income, you certainly may. But for this year especially, think about ways that you can reduce your outgoing expenses, similar to my client’s story above. I was on a Zoom video call with another retired client who told me, “Since we need to stay home anyway, we’ve decided to move up the planning for the kitchen remodel so we’re ready to start as soon as they lift the shelter-in-place. It’ll be less expensive than the European vacation we had planned, and we’ll enjoy being here a lot more when it’s done.” That’s a great way to think about reducing expenses and making lemonade out of lemons at the same time.

2. I’ve already taken my RMD (or a portion of it); can I re-deposit it back into my IRA?

Unfortunately, you can’t reverse it. If you haven’t taken the full amount for the year yet, though, you may want to consider not taking any additional payments for 2020. Because of the CARES Act, you may also be able to roll over your 2020 RMD into an IRA under certain conditions, but you should consult with your tax advisor before you attempt this.

3. No penalties for early withdrawals from IRAs or other retirement accounts.

For 2020 only, the usual 10% penalty for withdrawing money from a tax-favored plan prior to age 59 ½ is waived for withdrawals up to $100,000. Of course, those who make such withdrawals will still owe taxes on the amount withdrawn, but for distributions in 2020, the income attributable to these distributions will be taxed over three years rather than one. Also, you can re-contribute the funds to a qualified plan over three years without regard to the contribution limits to the plan. Another option is to borrow from your tax-favored account. For this year only, you’ll have extra time to repay the loans without penalty (up to a year for loans due by December 2020). Particularly for those of you with adult children who may need this flexibility to get through some choppy financial waters, this is helpful information.

4. People receiving Social Security aren’t required to file a tax return to receive their stimulus check.

According to new guidance from Treasury Secretary Mnuchin, persons receiving Social Security benefits who qualify to receive stimulus checks will not be required to file a tax return in order to get their money. This is good news for individual filers with less than $75,000 in adjusted gross income (AGI) and married couples filing jointly with less than $150,000 who will qualify for the full $1,200 payment to each individual ($2,400 for couples).

5. Extra incentives in 2020 for charitable contributions.

For the 2020 tax year only, donors may apply a special limit for gifts to public charities of 100% of AGI. For those who qualify, this provision can offer significant tax savings. Additionally, qualified charitable donations (QCDs) are still available, allowing you to direct up to $100,000 from your IRA to the charitable cause of your choice, even if you don’t itemize. The QCD is not recognized as income, so you don’t pay taxes on it. Finally, the CARES Act makes available in 2020 a special $300 “above-the-line” deduction for charitable contributions. Whether you itemize or not, this deduction allows you to make a charitable donation that simultaneously reduces your AGI. Be sure to consult with your tax advisor if you intend to utilize any of these gifting provisions in 2020.

And speaking of charitable giving… A few of you have expressed concern for some of the people in your life who provide important services — housecleaners, yard workers, hairdressers, and others. If you can do so comfortably, why not offer to pay for some services in advance? I recently pre-paid my house cleaner for the month of April to help her and her family. Even if you can’t actually go to the hair salon or gym right now, you can still help provide for your favorite stylist or trainer during these difficult economic times. There’s never a bad time to show kindness and consideration for others, and right now, we all need each other more than ever.


We’ve just learned today that the Small Business Administration (SBA) is advising that those who want to apply for the Paycheck Protection Program (PPP) should go to their banks. Most banks have developed or are developing a version of the application process tailored to their specific operations. You should contact your bank or visit their website to find out about particular application procedures.

As always, I’m available to you for questions, concerns, advice, and planning. Please email me at And if you’d like to read my recent blog article, “The CARES Act: How to Get Your $1,200 and More,” click here.

Stay Diversified, Stay YOUR Course!

And… Stay Your Social Distance, and Wash Your Hands!

Empyrion Wealth Management (“Empyrion”) is an investment advisor registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Information pertaining to Empyrion’s advisory operations, services and fees is set forth in Empyrion’s current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at The views expressed by the author are the author’s alone and do not necessarily represent the views of Empyrion. The information contained in any third-party resource cited herein is not owned or controlled by Empyrion, and Empyrion does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Empyrion of the third party or any of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner or investment advisor.

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