Ask Bob: Can I Return a Withdrawal from My Retirement Account?

Can you return an unwanted distribution from your IRA? There are three ways you could possibly accomplish this, says financial adviser Doug Gjerde.
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Question

I took a withdrawal from my retirement account on Dec. 28, 2020. Since then I have decided that wasn't a smart move. Can I return the full amount to an IRA?

Answer

There are three ways you could possibly accomplish this, says Doug Gjerde, CFP®, managing partner at Heritage Financial Partners, LLC. “The deadline has passed for one but there are two remaining possibilities in your case.”

In general, notes Gjerde, we all have a period in which we can change our mind on distributions from IRAs and get a do-over. “But this option has a hard and fast deadline that ends sixty calendar days after we receive our distribution - it is commonly referred to as a 60-day rollover. You are beyond the date where you can ‘put it back’ using the 60-day rollover rule.”

However, as you took this in 2020 there is a possibility of paying it back if you count as an “affected person” under Coronavirus Related Distribution (CRD) rules. “This is a special set of rules and requires that you meet one of several requirements,” he explains. “If you or your spouse were diagnosed with Coronavirus or experienced adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced then your distribution may qualify.” Under a CRD you can pay back the money or spread the taxable income over three years which potentially could mean paying less in taxes due to it.

Gjerde adds, “There is one last but expensive option. Since you missed the sixty-day period and if you are not an 'affected person' then your final possibility is that you can request a private letter ruling from the IRS to waive the 60-day rule. But it would have to be a big distribution to make this worthwhile as a user fee of $10,000 must accompany every request for a waiver of the 60-day rollover requirement to the IRS.”

Assistant editor Kim McSheridan assisted with this report. 

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Question

I took a withdrawal from my retirement account on Dec. 28, 2020. Since then I have decided that wasn't a smart move. Can I return the full amount to an IRA?

Answer

There are three ways you could possibly accomplish this, says Doug Gjerde, CFP®, managing partner at Heritage Financial Partners, LLC. “The deadline has passed for one but there are two remaining possibilities in your case.”

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