Have you found the need to take a withdrawal from your retirement plan during this pandemic or are you thinking about doing so to ease your burdens?
The CARES Act that Congress passed in late March includes provisions enabling people to take distributions or loans up to $100,000 from their IRA, 401(k) or 403(b) plan and get some favorable tax treatment for the calendar year 2020.
Usually, if you have not reached the age of 59-1/2, any withdrawals are subject to a 10 percent additional tax or surcharge for a premature distribution. That is definitely something to make you think twice about taking a premature distribution. Also, for an individual of any age, the distribution is normally reported in the tax year in which it is received. If you are looking to take a loan against your retirement plan, the maximum loan amount has been limited to $50,000.00.
But, thanks to the CARES Act, those scenarios have been adjusted for 2020. If you are under the age of 59-1/2 and take a distribution, there will be no additional 10 percent tax. If you take a distribution, you have three years to repay a 2020 distribution to your plan or IRA and undo the tax consequence. And, finally, if you need to take a loan, the maximum has been increased to $100,000.
There are some finer details with regard to the three allowances above and I suggest that you consult your professional team (tax preparer, accountant, attorney, financial advisor) or brush up on the details on irs.gov.
Just trying to provide some relief if relief is needed. Stay safe.