On March 27th, President Trump signed the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law. There is a lot of relief details in the 880-page Act so we will just highlight the retirement account contributions and distributions changes in this article.
There are four key points about retirement account contributions and distributions that have changed because of the CARES Act for 2020. First, the deadline for 2019 contributions into traditional and Roth IRAs has been extended to July 15, 2020 mirroring the tax return deadline. This also applies to contributions into Health Savings Accounts (HSA), Archer Medical Savings Account, and Coverdell Education Savings Accounts (ESA). Secondly, there are no required minimum distributions (RMDs) for 2020 from IRAs, Beneficiary IRAs, and employer-sponsored plans. The Act does not address &ldquoundoing&rdquo 2020 RMDs already taken but consult an advisor as new guidance might be available. Thirdly, the 10% early withdrawal penalty is waived for COVID-19 related distributions taken in 2020 up to $100,000 per individual across all company-sponsored plans and IRAs. Please talk to your advisor or plan sponsor for &ldquoCOVID-19 related distribution&rdquo qualifications. Distributions are still taxable, but the taxes may be spread evenly over the next three years, beginning in the year the distribution is taken. Alternately, the taxpayer has three years to roll the funds back into the plan or IRA. Lastly, the maximum loan amounts from company-sponsored retirement plans have increased from $50,000 to the lesser of $100,000 or the full account balance for individuals impacted by COVID-19. Loan repayments scheduled due after March 2020 may be suspended for up to twelve months. The loan must be current to qualify.
We are going through an unprecedented time relating to COVID-19. This Act has been passed to help lessen the blow of the economy and country being shut down. We wanted to help summarize some of the key points of the Act that individuals could take advantage of during these hard times. If you have an advisor, please discuss with them before taking money out of IRAs and 401ks. If you do not have an advisor or would like to learn more about the Act or discuss the opportunity cost risk of taking money out of the market, please contact our office. The short-term need might do more damage to your long-term future by taking money out after market selloffs.
Our mission is to help establish, manage, and protect our clients' financial plans, and we take that very seriously. The Argent Advisors team in Monroe has over 60 years of combined financial planning experience. No matter where one&rsquos objectives fall, we help our clients establish a definitive goal-oriented plan for current needs and for the future. Argent Advisors in Monroe is a fee-based, Registered Investment Advisor firm. We agree on an annual management fee, and then we work for YOU. We do not make money on account activity or have proprietary products. Our independent process assures you that we are acting in your best interest, not in ours! If you have any question about your financial planning needs, please contact our office.