As I’m sure you know, the $2 trillion “Coronavirus Aid, Relief, and
Economic Security” (“CARES”) Act was recently signed into law.
The CARES Act is designed to help those most impacted by the
COVID-19 pandemic, while also providing key provisions that may
benefit retirees.1
To put this monumental legislation in perspective, Congress
earmarked $800 billion for the Economic Stimulus Act of 2008
during the financial crisis.1
The CARES Act has far-reaching implications for many. Here are
the most important provisions to keep in mind:
- Stimulus Check Details - American’s can expect a one-time direct payment of up to $1,200 for individuals (or
$2,400 for married couples) with an additional $500 per
child under age 17. These payments are based on the 2019
tax returns for those who have filed them and 2018
information if they have not. The amount is reduced if an
individual makes more than $75,000 or a couple makes
more than $150,000. Those who make more than $99,000
as an individual (or $198,000 as a couple) will not receive a
payment.1 - Business Relief - The act also allocates $500 billion for
loans, loan guarantees, or investments to businesses, states,
and municipalities.1 - Inherited 401(k)s - People who have inherited 401(k)s or
Individual Retirement Accounts can suspend distributions in
2020. Required distributions don’t apply to people with Roth
IRAsÍž although, they do apply to investors who inherit Roth
accounts.2 - Suspended RMD - The CARES Act suspends the minimum
required distributions most people must take from 401(k)s
and IRAs in 2020. In 2009, Congress passed a similar rule,
which gave retirees some flexibility when considering
distributions.2,3 - Withdrawal Penalties - Account owners can take a
distribution of up to $100,000 from their retirement plan or
IRA in 2020, without the 10-percent early withdrawal penalty
that normally applies to money taken out before age 59½.
But remember, you still owe the tax.4
Many businesses and individuals within our community are
struggling with the new realities that COVID-19 has created. The
CARES Act, however, may provide some much-needed relief for
our neighbors, friends, and loved ones.
If you’d like to chat about how the CARES Act impacts you or to
see if these special 2020 distribution rules are appropriate for
your situation, give your advisor a call.
Under the CARES act, an account holder who already took a 2020
distribution has up to 60 days to return the distribution without owing taxes
on it. This material is not intended as tax or legal advice. Please consult
legal or tax professionals for specific information regarding your individual
situation. Under the SECURE Act, your required minimum distribution (RMD)
must be distributed by the end of the 10th calendar year following the year
of the Individual Retirement Account (IRA) owner's death. Penalties may
occur for missed RMDs. Any RMDs due for the original owner must be taken
by their deadlines to avoid penalties. A surviving spouse of the IRA owner,
disabled or chronically ill individuals, individuals who are not more than 10
years younger than the IRA owner, and children of the IRA owner who have
not reached the age of majority may have other minimum distribution
requirements.
Under the CARES act, an account holder who already took a 2020
distribution has up to 60 days to return the distribution without owing taxes
on it. This material is not intended as tax or legal advice. Please consult
legal or tax professionals for specific information regarding your individual
situation. Under the SECURE Act, in most circumstances, once you reach
age 72, you must begin taking required minimum distributions from a
Traditional Individual Retirement Account (IRA). Withdrawals from Traditional
IRAs are taxed as ordinary income, and if taken before age 59½, may be
subject to a 10% federal income tax penalty. You may continue to contribute
to a Traditional IRA past age 70½ under the SECURE Act, as long as you
meet the earned-income requirement.
Account holders can always withdraw more. But if they take less than the
minimum required, they could be subject to a 50% penalty on the amount
they should have withdrawn – except for 2020.
1. CNBC.com, March 25, 2020.
2. The Wall Street Journal, March 25, 2020.
3. The Wall Street Journal, March 25, 2020.
4. The Wall Street Journal, March 25, 2020.