New Rules Regarding Retirement Accounts
The Coronavirus Aid Relief and Economic Security Act has made a lot of significant changes in the rules regarding retirement accounts. In this article, we are going to discuss these rules.
For Any Coronavirus Related Expenses
For all retirement savers who have been adversely impacted by the COVID-19 pandemic, they will now be able to withdraw up to $100,000 from 401(k) or IRA or any other type of a similar retirement account until Dec. 31, 2020, without being charged the usual 10% penalty due to early withdrawal.
Also, for those who have been diagnosed with COVID-19 by a Centers for Disease Control and Prevention approved test approved, can now make emergency withdrawals from the retirement account. Along with this, those who have been adversely affected financially by being laid off or furloughed, they too are eligible for emergency withdrawals from the retirement account.
Facility to Put Withdrawn Funds Back into a Retirement Account
New rules regarding retirement accounts are often subjected to annual contribution limits which in turn makes it very difficult to rebuild your retirement account balance after you have had to take an early withdrawal. However, those who are withdrawing because of the coronavirus emergency can now put the money back into a retirement account, at any chosen time during the 3 years after the distribution.
You Can Now Delay Taking Required Minimum Distributions
Generally, withdrawals from the retirement account are mandatory for age 72 and older retirees each year. Now, in light of the COVID-19 pandemic, withdrawing money from the retirement account for the year 2020 for distribution can be skipped by those who don’t need it. Retirees can also avoid taking any withdrawals from depleted retirement accounts if they have any and further give the stock market time some time to recover before resuming the distributions.
Loan Limits Increased for 401(k) Participants
Generally, all the participants in 401(k) plans are always eligible to borrow up to 50% of their vested account balance up to $50,000 which is the maximum. However, now the CARES Act is allowing retirement savers to borrow up to 100% of their vested account balance up to $100,000 during the 180-day period. Keep in mind that this is after the law is implemented.
Now You Have Extra Time to Make 2019 IRA Contributions
For filing your tax return each year, IRA contributions have to be made by the due date. Now, because of the coronavirus pandemic, the due date for filing federal income tax returns has been pushed until July 15, 2020. Also, remember that if you happen to be in the 24% tax bracket and contribute $6,000 to an IRA for 2019, then you will be eligible to reduce your federal income tax bill by $1,440.
