Ready for the Return

The onset of COVID-19 last year had sudden and widespread impacts, including a volatile market reaction. In response, the Internal Revenue Service (IRS) announced that required minimum distributions (RMDs) were waived in 2020.  As such, retirees didn’t have to sell from retirement accounts during such economic distress and a downward market. The rule, which was made official as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), included anyone of RMD age as well as the beneficiaries of RMD accounts. Now, RMDs are back for 2021 and once again necessary for all retirement accounts, excluding ROTH IRAs. 

Backtracking to late 2019, a significant change was made I’d like to revisit.  As of December 31, 2019, via the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) the beginning age for RMD requirements was bumped up from 70 ½ to 72.  Those who reached age 70 ½ before this date were required to begin taking RMDs, but for those who did not, age 72 is when the distributions become required.   

Given the 50% penalty for not meeting RMDs, staying on top of these distribution targets is key. While custodial channels remain the record keepers of the RMD target distribution for a given calendar year, the Black Diamond® Wealth Platform introduced an RMD oversight tool to evaluate aggregation of distributions across IRAs and other eligible accounts. 

Black Diamond’s RMD tool identifies clients who are required to take RMDs because they’ve reached the obligatory age and have investments in eligible retirement accounts. Over the course of the year, advisors can proactively monitor clients who:

• Have satisfied their distribution targets;
• Are on track taking distributions and if continued, will meet the target at year-end; and
• Need to take distributions to meet the required target

Details related to the RMD calculation are provided for each client and contextual research links allow for a review of the distributions calculated from every retirement account. In addition to tracking clients required to take distributions, the system also detects those nearing retirement age so preparations for incorporating these funds into cash flow planning can be made.

What are Black Diamond’s plans going forward? Oversight across an advisor’s client base felt like an important place to start. Next, the plan is to take this to Client View so there are easy insights into distributions required for an entire client relationship, such as a spousal relationship.  The team also sees an opportunity to incorporate RMD information into the Client Experience portal so the topic can be presented to clients along with the rest of their financial life. More advanced handling and management of RMD tracking as well as data synchronizations with custodial partners are also being evaluated.

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