The $2 trillion Coronavirus Aid, Relief and Economic Security Act, aka the CARES ACT was recently signed into law and was designed to help those most impacted by the COVID-19 pandemic, while also providing key provisions that may benefit retirees.
Here are three important stipulations for clients of Henry Wealth Management to be aware of:
Suspended RMDs - The CARES Act allows for individuals presently age 72+ to suspend any further or future required minimum distributions for the balance of 2020 from 401(k)s and IRAs.
If you do not need the funds that you were otherwise were required to take, consider pushing the pause button for the balance of 2020 to avoid taking distributions out of an account that likely has decreased in value. This of course, will mean less taxable income and less taxes for the 2020 tax year as well.
Inherited 401(k)s - The CARES Act allows for individuals to suspend any further or future required minimum distributions for the balance of 2020 from inherited 401(k)s or IRAs. Same logic as above applies.
Penalties (not taxes) Waived - The CARES Act allows for individuals to take a distribution of up to $100,000 from their retirement plan or IRA in 2020, without the 10-percent early withdrawal penalty that normally could apply to account owners who are under the age of 59½. It's important to note that this does not waive ordinary income taxes due as a result of such a distribution, just the additional 10% penalty tax.
As always, we encourage you to contact your tax or legal professional to understand how it the rules might impact your particular situation.
At Henry Wealth Management, “The First Thing We Earn is Trust” so please let us know if we can help.
NOTE: This recent Forbes article is an excelled reference for more details;The Top 8 Must Know Rules For COVID-19 RMD Waivers Under The CARES Act