On Friday, March 27th, President Trump signed into law The Coronavirus, Aid, Relief, and Economic Security Act (“CARES Act”). Besides billions of economic stimulus for broad industries affected by the virus (e.g., airlines, restaurants, hotels), large corporations, hospitals, new loans to businesses, etc., the new law provides some level of economic relief to investors and retirees…
– Withdraw up to $100,000 from your 401(k)
– Spread Tax Cost Over 3 years
– Put the Money Back if You Can
401(k) Coronavirus-Related Distributions (“CRDs”)
IF you are younger than 591⁄2 before 2020, you were not able to take an in-service withdrawal from your employer-based contribution plan (e.g., 401(k)). Now, thanks to Section 2202 of CARES Act, employees can withdraw up to $100,000 from their plan – without the 10% penalty – if they have been affected by the virus and the withdrawal is taken in 2020. Employees can also spread the taxes out from that withdrawal over the next three (3) years if they want or need to avoid a large tax bill for 2020. Furthermore, the employee can even repay that money back into their plan within the next three (3) years if they’d like to make their plan whole again.
Don’t Do It!!! – Protect Your Retirement Saving!
Although this is an option, I strongly recommend it as only a last resort. It is so hard to get money into a savings account, and now SO EASY to get it out. Guard the Seed!! Don’t be tempted to spend your future prosperity today! You deserve to Retire Happy!
Use this to your Tax Advantage!
The $100,000 CARES Hardship Withdrawal (“The One Hundred Grand Safety Plan”)
Many investors and 401(k) owners who are under 591⁄2 and have been affected by the virus may wish to take advantage of the CARES Act “CRD” provision by taking a penalty-free withdrawal in 2020. The 401(k) plan must allow this CARES provision; it is a plan option. 401(k) plans currently allow for hardship, a casualty, and/or disaster withdrawals, so this is a variation on that type of withdrawal.
Those who do take a withdrawal can get their retirement money repositioned. They can create a pension benefit at retirement with no further worry about what the stock market future may do to their plans. Also, it is possible to take advantage of a lower-earning year and save some money on taxes.
It is probably best you contact us to discuss this one. I don’t want you to miss out on the CARES Act benefit.
Independence Excellence Group