Retirement Accounts Could Bring Relief to Some

Ret irement acc ounts Could ring Re ie to Some

by Shelly Dodge, President and Financial Advisor at Visionary Financial Group

We are living in unprecedented times which cause concern for all of us. As our government continues to find creative ways to lift some of the burden, I felt it was timely to share the information below regarding some recent changes to retirement accounts.

Although, any other time my advice would be to use your retirement accounts as a last resort, these times may call for extreme measures. Keep in mind, retirement funds are an essential part of your financial well-being. It’s never a good time to pull retirement funds out early, but when your retirement accounts are already down in value, this becomes double-trouble.

On Friday, March 27, 2020, new legislation was signed into law that aims to provide relief to Americans and businesses negatively impacted by COVID-19 crisis. This legislation, known as The Coronavirus Aid, Relief and Economic Security (CARES) Act, is a $2 trillion relief package that includes direct monetary payments to Americans as well as various business subsidies to counteract some of the adverse economic conditions resulting from the pandemic.

Additionally, the law provides several new relief provisions pertaining to retirement accounts (for those who qualify). Some of these time-bound provisions include the following:

Penalty-free distributions from retirement accounts: The CARES Act waives the early withdrawal penalty for “coronavirus-related distributions” up to $100,000 from qualified (retirement) plans. Prior to the CARES Act, plan participants

photo courtesy of Shelly Dodge

under age 59½ were subject to a 10% penalty if they made withdrawals from their retirement plan, such as a 401(k) or IRA. Distributions are still taxable to you as income. This can be paid over a three-year period. You also have up to three years to pay back the distribution to avoid some or all of the taxes.

Increase on loan amount from qualified plans: For a 180-day period following the enactment of the CARES Act, qualified individuals can take out loans from their 401(k) up to $100,000, up from the previous amount of $50,000 (if your plan allows it). Outstanding qualified loan repayments may be suspended for 1 year.

Required Minimum Distributions suspended: The CARES Act suspends required minimum distributions (RMDs) from taxdeferred retirement accounts for one year. The suspension of RMDs shields retirees from being mandated to withdraw from their accounts.

The above are just a few highlights of the Act. The legislation is very extensive and includes additional relief provisions for small and medium sized businesses, individuals and households, among many others.

972.539.0002 sdodge@nextfinancial.com. www.visionaryfinancialgroup.com.