The CARES Act was designed to provide a measure of financial relief to Americans impacted by the coronavirus pandemic. The two-trillion-dollar legislation was passed on March 27, 2020.
As noted in a prior post, among the law’s provisions is an easing of restrictions related to retirement accounts. The law allows eligible individuals to borrow up to $100,000 from their 401k, 403B or IRA account between Jan. 1, 2020 and Dec. 30, 2020, without incurring the 10% penalty customarily imposed if the borrower is under age 59 ½. Taxes must still be paid on the withdrawn funds. However, the tax is waived if the full amount is paid back within three years.
Now, the IRS has extended these favorable provisions to more people. In addition to those the CARES Act already identified as eligible, the IRS now includes individuals, spouses and household members who have experienced the following as a result of the pandemic: (1) Had a job offer withdrawn; (2) Had a job start date delayed; or (3) Experienced a reduction in pay. Read the IRS notice 2020-50 containing detailed guidance.
Retirement plans upended
A recent Harris poll commissioned by TD Ameritrade reveals the extent to which the pandemic has impacted retirement savings. The poll of 1,008 Americans ages 24 to 73, conducted from April 24 through May 4, found that nearly a third now expect never to be able to retire. The 60% who regularly contributed to their retirement plans report that they can no longer contribute. And among Baby Boomers, 37% have delayed or are now considering delaying retirement. You can read the poll details here.