CARES Act – Last Day for Penalty Free Withdrawals from 401(k), 403(b), IRA Plans

Summary

We have withdrawn $100K from our 401(k) and are spreading the taxes over three years.  This is the max allowed by the CARES Act, and access to this provision expires December 30, 2020.  We haven’t decided where to reinvest yet, but starting tomorrow the cost for this withdrawal goes back up to include the typical 10% penalty.  If you are interested, call your plan provider today and let’s connect next week so we can discuss some options.

Exerts from the full IRS Coronavirus Tax Relief article. 

“Section 2202 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, provides for special distribution options and rollover rules for retirement plans and IRAs….

“In general, section 2202 of the CARES Act provides for expanded distribution options and favorable tax treatment for up to $100,000 of coronavirus-related distributions from eligible retirement plans (certain employer retirement plans, such as section 401(k) and 403(b) plans, and IRAs) to qualified individuals, as well as special rollover rules with respect to such distributions….

“You are a qualified individual if –

  • You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;
  • Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;
  • You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;
  • You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or
  • You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.

 

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