If you have an IRA or a 401k account with your employer, there are some benefits you can experience regarding withdrawals thanks to the current CARES Act that offers relief to those affected by the economic difficulties from the Covid-19 pandemic. According to section 2202 of the CARES Act, there is an increased expansion of distributions from 401k and IRA plans up to $100,000. In addition, the CARES Act also allows for an increase in the limits that a person can borrow from an eligible retirement plan excluding an IRA.
Those who qualify for these benefits are people who have been diagnosed with Covid-19, whose spouses contracted Covid-19, and families who lost their jobs or experienced a reduction in work hours or pay due to the quarantine brought on by the pandemic. The benefits would also apply to those who are unable to work due to a lack of ability to obtain child care for their kids. And it will help people who had to close their businesses due to the shutdown brought on by the pandemic.
Under the CARES Act, there is also a temporary suspension of the required minimum distributions both for inherited IRAs and traditional IRA accounts of people over age 70 and a half. In addition, there is also a waiver of the 10% penalty for taking out funds from your retirement accounts, and the waiver applies to any funds that were removed starting in January 2020 and will extend to December of 2020. The mandatory 20% income tax withholding for rollover distributions is temporarily suspended. You will still need to pay income taxes on your withdrawals, but CARES Act allows you to pay them in three years.
In conclusion, with these new benefits, you can maximize your retirement accounts and use the funds to assist you with any financial difficulties you might have due to this pandemic.
