Due to the impact of COVID-19 on the United State’s economy, Congress passed the CARES Act to assist businesses and individuals weather the economic downturn. While the focus of the Act revolves around economic stimulus such as cash payments, increased unemployment benefits to individuals, grants, loan relief, and forgivable loans to businesses, also included in the Act are some benefits related to retirement plans.
While it feels like a long time ago now, at the end of 2019, Congress passed the SECURE Act which raised the required minimum distribution (“RMD”) age from 70½ to 72. Now, only three months later, the CARES Act suspends required minimum distributions completely in 2020. This relief also includes inherited IRAs. If you need the funds to pay expenses, you are still able to take distributions from your retirement plans, but you are not required to take a minimum amount this year. While tax deferral is usually a good strategy, you should consult your tax professional to decide if not taking a distribution from your retirement plan this year is your most advantageous course of action.
Another benefit of the CARES Act is that you can take a withdrawal of up to $100,000 from most retirement plans in 2020 if you are affected by COVID-19 and the withdrawal is reported as income over three years and/or you can repay it within three years. Additionally, if you are under age 59½ there is no 10% penalty being applied for taking the early withdrawal. To be affected by COVID-19 means:
- you are diagnosed with COVID-19,
- your spouse or dependent is diagnosed with COVID-19; or
- you experience adverse financial consequences as a result of:
- being quarantined,
- being furloughed or laid off or having work hours reduced due to such virus or disease,
- being unable to work due to lack of child care due to such virus or disease,
- closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or
- other factors as determined by the Secretary of the Treasury (or the Secretary’s delegate).
If you have additional questions about how the CARES Act impacts your retirement plan, please contact your private wealth advisor.
By Read Sawczyn
Senior Vice President & Private Wealth Advisor, Trust
Articles In This Issue:
2020 First Quarter Review and Commentary
GRAT Planning Benefits from Low Interest Rates and Decreased Market Values
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