CARES Act Expansion-What You Need To Know In June, the IRS expanded the relief provided by the CARES act in two ways. Now all unwanted Required Minimum Distributions taken from IRAs or company plans in 2020 can be rolled over by August 31, 2020 so that no tax would be due. This includes distributions taken in January which were previously excluded. In addition, the IRS expanded the definition of who is eligible to take penalty-free distributions or loans from their 401(k)s and IRAs. A “qualified individual” is eligible to take up to $100,000 of coronavirus-related distributions (CRDs) penalty-free from employer plans and IRAs and spread the taxes over three years. The IRS expanded the definition of a qualified individual in June to include anyone who has someone in their household, a spouse or a roommate, who was negatively impacted by the virus, including a reduction in pay or having a job offer rescinded. The normal 20% mandatory tax withholding is waived along with the 10% pre-59 ½ early withdrawal penalty. The individual has three years to either pay the tax or to roll the funds over back into the plan or an IRA. The IRS also expanded the ability to take a tax-free loan from a retirement plan, increasing the amount to $100,000 or 100% of the funds in the plan. No interest is due during 2020, and the individual has five years starting in 2021 to pay the loan back with interest to the plan. Employer plans are not required to provide either the CRDs or the expanded loan provisions, but surveys showed that most plans were providing the additional relief. So, the ability to access your retirement plan and IRAs have been expanded. The question is should an individual take advantage of this? If someone has been negatively impacted by the virus, they need to weigh the opportunity
16 BOOM!
July 2020
RiverRegionBoom.com
Financial Thoughts with Susan Moore
complimentary and without obligation. If you would like a consultation, please call 334.270.1672 to schedule an appointment with Susan. Susan Clayton Moore, J.D., is a financial advisor and wealth manager with Moore Wealth Management, Inc., which has offices in Montgomery, Alexander City and Auburn. Susan has been a financial planner for over 37 years. She has been quoted in Kiplinger’s Magazine and Investment News. Susan earned her law degree from Tulane University in 1981.
By Susan Clayton Moore, J.D.
Principal of Moore Wealth Management, Inc.
cost of lost growth in their retirement savings with the immediate need for funds. Another option to consider is taking a home equity loan. Important considerations would be the difference in interest rates and the probability that your job gets eliminated, which could force an immediate repayment of the loan to the retirement plan. One option is to take the CRD so that you can roll it over to your IRA. This would give you the option to convert it to a Roth IRA in a year in which your tax bracket might be lower. Your IRA might have investment options not available in your 401(k) such as annuities with living benefit guarantees. Before taking a CRD and rolling it over into your IRA you would want to compare fees and expenses, investment options, services, the ability to take penalty-free withdrawals, estate planning aspects and tax-treatment of employee stock, among other aspects. The expanded relief offered by the CARES act makes it advisable for qualified individuals to consider their options carefully by consulting both their financial advisor and their accountant. At Moore Wealth Management, our consultations are always confidential,
In this time of coronavirus, Susan is conducting daily market updates by webinar. During the daily market updates, Susan will discuss events that are impacting the markets, sharing her opinion and those of strategists she respects. There will be no specific investment recommendations as to any security or predictions of specific performance. She believes that we are in unprecedented times and that sharing information is a valuable resource to make it through the month ahead. If you would like to be included in the webinar, please contact Sarah at 256.234.2761 or sarah@moorewealthmanagement.com. Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Kestra IS or Kestra AS are not affiliated with Moore Wealth Management, Inc. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.
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