Americans who have been adversely affected by the COVID-19 pandemic may now be able to access retirement accounts to help cover daily expenses, penalty-free.
Now, in addition to those who have lost their jobs during the COVID-19 pandemic, you may access your retirement funds without being subject to the 10 percent penalty if your income was reduced, or who’ve had the start of a new job delayed.
The expanded guidelines also let people dip into their retirement accounts if they’ve lost a job offer, or if their spouse’s income was impacted as a result of the pandemic.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was designed to help Americans deal with the economic impacts of the COVID-19 pandemic. Under the CARES Act, the Internal Revenue Service has recently released updated guidelines that will allow more Americans to access money in their retirement accounts without penalty.
Estimates project that up to 31 million Americans may access their retirement savings to help them weather the economic turbulence caused by the current global health crisis.
It’s important to remember that CARES Act funds must be used for coronavirus-related financial needs. Those taking advantage of these funds have up to three years to repay a pandemic-related distribution to undo any potential tax situation.
The CARES Act is a complex piece of legislation, and the rules governing access to retirement accounts can be tricky to grasp. If you’re considering taking advantage of the CARES Act, let’s connect to discuss your overall financial situation and how you can pursue your goals.
Footnotes, disclosures, and sources:
In most circumstances, once you reach age 72, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA), 401(k) or other defined contribution plans. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. However, that penalty may be waived under the CARES Act.
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