Who Is Required to take Required Minimum Distributions (RMD) from their Solo 401k Plan in 2020

Recent legislation, known as the Secure Act, does not affect required minimum distributions for the 2019 tax year.

IMPORTANT:  Required Minimum Distributions are waived for 2020 under The Coronavirus Aid, Relief and Economic Security (CARES) Act

  •  The  CARES Act legislation waives the requirement for any RMD from a solo 401k plan that is required to be paid in 2020. This includes 2019 RMDs having a required beginning date of April 1, 2020.
  • VISIT HERE, for more FAQs surrounding the CARES Act relief for 2020 RMDs.

You generally have to start taking withdrawals from your solo 401k plan when you reach age 70½. You cannot keep retirement funds in your solo 401k plan indefinitely.

Your required minimum distribution is the minimum amount you must withdraw from your solo 401k account each year.

  • You can withdraw more than the minimum required amount.
  • Your withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth solo 401k accounts).

Who is Required to Take an RMD from their Solo 401k Plan in 2020

Turned 70 1/2 in 2019: If you reached age 70 1/2 in 2019, you are required to take your first RMD by April 1, 2020 if you did not already take it in 2019. You reach age 70½ on the date that is 6 calendar months after your 70th birthday.

Illustration 1: Your 70th birthday was May 15, 2019. You reached age 70½ on November 15, 2019. You must take your first RMD (for 2019) by April 1, 2020. You would alse need to take your 2020 RMD by 12/31/2020 since you turned age 70 1/2 in 2019.

Illustration 2: Your 70th birthday was July 15, 2019. You reached age 70½ on January 15, 2020. You ARE NOT required take your first RMD until you turn age 72 (in 2022) because your solo 401k account is now subject to the new SECURE Act rules.

Turned 70 1/2 in 2018 or Prior Years: Recent legislation, commonly known as the Secure Act, raises the age for required minimum distributions to 72 beginning in 2020. However, if you turned 70 1/2 in 2019, 2018 or prior years, you still have to continue taking RMDs even if you have not yet reached age 72.  Simply stated, all solo 401k participants born on or before June 30, 1949, are subject to the old rule, which makes the 70½ year the first distribution year.

Already took 2020 RMD in 2020 QUESTION:

If I have already taken my RMD for 2020, I can put it back but I did not see how long I have.  Is it year end?

ANSWER:

Until further IRS guidance, and based on current guidance ( Notice 2020-23 &  Notice 2020-18 ), you have until the later of (i) 60 days after receipt of the distribution or (ii) July 15, 2020 to complete the RMD rollover back to the solo 401k or to an IRA.

IRS Notice 2020-51 Extends RMD Rollover Period to August 31, 2020

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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