The CARES Act: What you need to know for Retiring Well

A significant portion of the CARES Act focuses on supporting businesses and their employees during the economic impact of the current pandemic. The legislation does, however, have two meaningful benefits and changes for retirees.

Recovery Rebates for Individuals

Most taxpayers will receive a refundable income tax credit against 2020 income of up to $2,400 for married couples filing a joint return, or $1,200 for single filers. Additional credits of up to $500 will be given for each child a taxpayer has under the age of 17.  However, the credits are reduced for taxpayers with Adjusted Gross Income (AGI) above:

  • Married filing joint: $150,000, phasing out entirely above $198,000
  • Single filers: $75,000, complete phase out above $99,000

The initial amount paid will be based on the taxpayer’s 2018 or 2019 income tax return (whichever is the latest return that the IRS has on file) but will ultimately be increased if a taxpayer is owed money based on their actual 2020 income.

One tip to discuss with your tax preparer: the filing deadline for 2019 income tax returns has been extended to July 15, 2020. If your income was below the threshold in 2019, but not low enough in 2018, consider filing your 2019 tax return as soon as possible.

The CARES Act requires that these payments be made as soon as possible, but early indications from the Treasury Department are that “as soon as possible” may not be until sometime in May.

Suspension of Required Minimum Distributions (RMD) for 2020  

All required minimum distributions for 2020 are waived. The waiver applies to all IRAs (included Inherited IRAs), SEP IRAs, SIMPLE IRAs, as well as 401(k), 403(b), and Governmental 457(b) plans.  

For some retirees, this is a welcome relief from recognizing unneeded income and its subsequent taxation. If you are required to take a distribution for 2020 and have not taken your RMD yet, you could consider living off other non-retirement accounts or cash for 2020 and reducing your taxes. If you need the income and do not have ample sources outside of your IRA, focus on what you need vs. the past requirement.

  • If you have already taken your RMD for 2020, you may be able to return the proceeds to your retirement account. The following rules apply: 
  • If you contribute the funds back within 60 days of the original distribution 
  • If you took your RMD more than 60 days ago (e.g., in January), you may still contribute it back, if you have been impacted by the COVID-19 crisis under the generous list of requirements. Consult your Brightworth Advisor or tax advisor for specifics.
  • If you are the beneficiary of a retirement account and have already taken an RMD, unfortunately, the Act does not allow for those distributions to be contributed back into the account.  

However, a spouse who chose to remain a beneficiary of the deceased spouse’s retirement account is eligible to contribute the RMD back into their own IRA account.

Brightworth Retiring Well seeks to help you thrive in retirement, even in our current situation.  We are available to talk to you about your retirement picture. 


This information was derived from sources believed to be factual and reliable. It is being provided for informational purposes only and should not be construed as tax or legal advice. Please consult a tax or financial advisor with questions about your specific situation.