Florida Elder Law & Estate Planning Blog
CARES Act changes retirement account rules
March 27, 2020
The CARES Act (Corona Aid, Relief and Economic Security Act) signed into law on March 27 provides $2 trillion in relief for Americans impacted by the COVID19 pandemic. Among its many provisions, the law relaxes several rules for retirement accounts in order to help retirees and workers ride out the economic fallout. Before taking any steps, be sure to check with your accountant and/or financial advisor. Here are the two key provisions in the law that affect retirement accounts:
Required Minimum Distributions Waived
You need not take your required minimum distribution in 2020. The usual 50% penalty is waived. If you can afford to forego your distribution, you can avoid selling low and you will have another year to make up for the losses.
Better Terms For Loans From Retirement Accounts for Corona Virus-Related Hardship
If you are younger than 59 ½ and have been adversely impacted by COVID19, you may withdraw up to $100,000 from your IRA, 401k or 403b before Dec. 31, 2020, without incurring the 10% penalty. You will still need to pay income tax on the withdrawal, but the tax may be paid out over the course of three years. You may repay the entire amount within three years, in which case there are no tax consequences.
You are considered to experience a COVID19-related hardship if you, your spouse or dependent have been diagnosed with COVID 19; of if you have been laid off, furloughed from your job or your hours reduced, or you cannot work because of lack of child care.
You can read more about the new law here.
The steps now permitted under the CARES Act are not necessarily the best ones for your particular situation, so be sure to discuss any retirement plan strategies with your financial advisor and CPA.