facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause

What does the CARES Act do for Retirement Accounts?

What provisions does the CARES Act have for retirement accounts? There are several important points which benefit you and your retirement savings. View this week's Arista Advice for more insight.

Full Transcript:

Hello, welcome to Arista Advice. Hope you're well and having a great day.

Question of the week is Paul, can you provide some insight on the CARES relief act for retirement accounts?
This legislation is massive. It was passed in March of 2020.  Three months before that the SECURE Act was passed. There's a lot of changes in play in regards to the SECURE Act. Let me give you a couple of updates for the CARES Act.

Number one: You can take up to up to $100,000 penalty-free from a Coronavirus related IRA and company plan distributions during 2020. 
Also, most plan sponsors allow for Coronavirus related distributions, which are being classified as CRDs.  
Also, CRDs can be repaid within 3 years to retirement account tax-free. Repayment does not have to come from the original source. 
Also, income on federal income tax returns from a CRD can be spread equally over a 3 year period, beginning with the year of distribution. That is a real benefit for those that have been affected by Coronavirus. 

Another quick item for update is RMD the "R" is no longer in the RMD. There's no required minimum distributions in 2020 because of the CARES Act. If you've taken it, you can go back 60 days. If you're in that window, you can restore it really big important point. 
Also if you have a SIMPLE, a SEP, a 401(k), 403(b), 457 all these plans no longer have an RMD for this year in 2020. Some RMDs already taken, please speak with your advisor, professionals, devise a strategy to discuss that and to make the best use of that action.
Roth conversions and company plan rollovers to IRAs can be done in 2020 without first taking an RMD. 

Also, how do you avoid the 10% penalty? Remember if you're pulling money out or touching money before age 50 inside an IRA or 59 and a half inside of a 401(k) plan that you have to pay a 10% penalty. That also is waived with the early distribution penalty. It's really important to understand all of the complexities of these rules both in the SECURE Act and the CARES Act.

These are just some items. Please speak with your advisors you professionals and also devise strategies that are going to best fit you and help to get you to your objectives and goals in life. Have a great day, and we look forward to talking to you soon.