Do You Know About No-Penalty 401(k)/IRA/403b Withdrawal in the CARES Act?
CARES Act makes it easier to withdraw funds saved in certain tax-advantaged retirement accounts like 401(k) and traditional Individual Retirement Accounts (IRAs).
Benefits offered under the CARES Act?
- Withdraw upto $100,000 on or after January 1, 2020, and before December 31, 2020.
- No 10% early distribution penalty.
- No mandatory 20% withholding applicable.
- Under normal circumstances, the amount withdrawn is added to the individual ordinary income. But the CARES act allows the individual to spread over a three-year period starting 2020 to reduce tax burden.
- An individual can contribute back the amount withdrawn to the plan or IRA within three years.
- The maximum loan amount is increased from $50,000 or 50% of the vested account balance to $100,000 or 100% of the vested account balance. The loan should be taken by December 31, 2020.
Who is eligible?
- Is diagnosed or whose spouse or dependent is diagnosed with the virus SARSCoV-2 or coronavirus disease (COVID-19) by a test approved by the Centers for Disease Control and Prevention
- Experiences adverse financial consequences due to one or more of the following factors:
- Being quarantined
- Laid off
- Having work hours reduced
- Unable to work due to lack of child care due to SARS-CoV-2 or COVID-19
- Closing or reduced hours of a business owned or operated by the individual due to COVID-19
- Other factors as determined by the Treasury Secretary
3. Plan administrators may rely on an employee’s certification that the employee meets these requirements.
We are here to help. We further simplified our Plootus app that does not even require linking any financial accounts such as 401k, bank or credit card. You can simply search your employer 401k plan on our app and get the portfolio allocation. We have analyzed hundreds of employers’ 401k/403b plans already and selected the best performing funds based on their risk and return profile. Most people are worried about volatility in the stock market and we can provide you with the portfolio allocation for your chosen strategy whether it is growth-oriented or conservative for FREE! Download Plootus from Apple or Android app store.
Please take of yourself and your family.
Feel free to use the comments section and we will be happy to answer any questions you may have.
That’s it from our end. Until next time!
Author: Sunil Gangwani, Co-Founder, Plootus