Retirees get some help with CARES Act
The current and unprecedented financial situation facing the world economy is frightening for most Americans. Much has been written about the stimulus checks, small business loans and unemployment benefits the CARES Act delivers to those in financial distress.
But what is the act's impact as far as retirement finances are concerned?
There are two parts of the CARES Act anyone at or nearing retirement should understand as they refigure their finances to weather the current pandemic-induced storm.
First, the CARES Act waives the rule that people 70 and older have to take required minimum distributions for 2020 from traditional 401(k)s and individual retirement accounts, according to AARP. "Since 2020 RMDs will be based on the value of accounts at the end of 2019, when the stock market was near all-time highs, the delay could give the accounts time to recover part of their previous value," information from AARP explains.
Second, according to Tate Taylor, the leader of the Private Client Services Practice Group at Trenam Law in Tampa, Florida, it permits a qualified individual to receive a distribution of up to $100,000 from a retirement plan account without the usual withholding requirement or without the 10% early distribution tax for individuals who are 59½ or younger.
The bottom line for those in an unforeseen bind? "These changes may provide important financial relief to individuals facing adverse financial consequences as a result of coronavirus," Taylor says.
Here, Taylor answers a few questions about the new provisions:
Q: Can anyone now required to take RMDs just stop immediately? Or are there financial requirements they have to meet?
A: The CARES Act simply waives RMDs in 2020. No additional qualifications are required.
Q: What about the $100,000 penalty-free distribution from a retirement account outlined in the Act. Can that be from any kind of retirement account?