The changes are coming fast and furious.
The CARES Act ( the “Act”) waives the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020. This provision provides relief to individuals otherwise required to withdraw funds from such retirement accounts. If an individual has taken their RMD, they can redeposit it if sixty days have not elapsed since the date of the distribution.
Hardship IRA/401(k) Withdrawals for Younger Participants
The Act will allow coronavirus related withdrawals from their 401(k) and IRA accounts up to $100,000 during 2020 and avoid the normal 10% penalty for those not of the required minimum age of 59.5.
Reasons for Coronavirus related withdrawals include
(1) An account owner diagnosed with COVID-19, or
(2) A spouse or dependent is diagnosed with COVID-19, oe
(3) An individual who experiences adverse financial consequences because of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to the coronavirus, or
(4) closing or reducing hours of a business owned or operated by the individual due to coronavirus, or
(5) or other factors as determined by the Treasury Secretary.
You are still required to pay income taxes but don’t have to pay the full amount in one year. You can spread that tax due over three years. Another option is to redeposit the withdrawn amounts back within three years.