Stimulus Update: Tapping Retirement Accounts
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In this article I want to give you more information about the changes that the CARE Act Stimulus package has made to retirement account withdraws.
If you have specific questions about your own retirement benefits, please do not hesitate to reach out to me directly. Although it is a very busy time for CPAs and everyone in the financial industry right now, I will do my best to respond to your questions in a timely manner.
Are Required Minimum Distributions suspended?
Yes. For the calendar year 2020, no one is required to take an RMD from any IRA or 401(k). This way, you aren’t forced to sell investments that may have fallen in value, which would lock in losses.
What if I have to take money out of my IRA. or 401(k) early?
You can withdraw up to $100,000 this year without the usual 10 percent penalty, as long as it’s because of the outbreak.
Also, you can spread any income taxes that you owe over three years from the date of the distribution. And you can put the money back into the account before those three years are up, even though the rules may normally keep you from making a contribution that large.
CAUTION: This exception applies only to coronavirus-related withdrawals. You qualify if you tested positive, a spouse or dependent did or you experienced a variety of other negative economic consequences related to the pandemic. Employers can allow workers to self-certify that they are qualified to pull money from a workplace retirement account.
Can I borrow from my 401(k) or other retirement plan?
Yes. You can withdraw twice the usual amount. For the next 6 months, with certification that you’ve been affected by the pandemic, you’ll be able to take out a loan of up to $100,000. Usually you can’t take out more than half your balance, but that rule is suspended.
If you already have a loan and were supposed to finish repaying it before Dec. 31, you get an extra year.
About Gary Levine and the Stimulus Series:
My name is Gary Levine and I am a CPA and tax preparer in the West Fan area of Richmond, Virginia. I am studying all aspects of the legislation and posting straight-forward information to serve my community. I encourage all to ask questions either publicly or privately in this forum. I encourage you to share this information with others.
If you’d like, you can follow my Facebook page to gather more information from other people’s questions and my answers. Please know that in this difficult time, I am providing this information as a free, helpful service and in no way intend for this to be self-serving. These are complex topics and times, and my goal is always to help you navigate financial challenges with ease.