RETIREMENT PROVISIONS IN THE CARES ACT
While there are some provisions in the CARES act that will allow you to access your Retirement funds, I would strongly advise before you make these moves that you discuss them with your financial advisor.
Since the market has tanked, this may not be the time to get out, and possibly miss out, if the market recovers. But if you need cash, then consider these options.
LOANS FROM 401(K), 403(B), 457(B) INCREASED.
The ability to take loans from your 401K has increased from $50,000 to $100,000 or the full vested balance, but a plan amendment is required by 12/31/2022.
DISTRIBUTIONS FROM PLANS WITH NO PENALTY
You can take up to $100,000 out of retirement accounts and not pay the 10% penalty (a plan amendment is required by 12/31/2022), with 2 options on the taxes due:
- Pay the tax over 3 equal installments in 2020, 2021, 2022.
- Pay back the distribution in one or more payments over the same 3 years, as if it were a rollover contribution.
All of these provisions must adhere to the following:
To qualify, the participant (or spouse or dependent) must have been diagnosed with the illness, or have experienced adverse financial consequences as a result of a quarantine, furlough, layoff, reduction in hours, or inability to work due to lack of child care due to the virus. The owner of a business can also qualify if the business has had to close or reduce hours.
If you don’t qualify under the provision above, there is a provision in prior law for a hardship distribution for a federally declared disaster area declared by FEMA.
To date, CA, NY, VA, PA, all the New England states, and other states have been declared a disaster area by FEMA.
Required minimum distributions (RMD) are waived for 2020, retroactive to 1/1/2020.
If you have already taken an RMD in 2020, you can, if you choose, pay it back within 60 days of receipt.
LOAN REPAYMENTS SUSPENDED
Loan repayments in retirement plans can be suspended for 2020
Check with your company on these.