Cary Stamp, leading financial advisor based in Jupiter, FL, provides an update on beneficial CARES Act provisions for retirement accounts—including IRAs and 401(k)s—to help with the financial challenges of the COVID-19 crisis.

 

 


 

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TRANSCRIPT:

Hi, I’m Cary Stamp. This is a Principled Wealth Moment. I would like to share with you some updates regarding retirement plans and what you’re able to do with them. This is new information that comes from the CARES Act passed within the last couple of weeks by Congress. It applies to both 401k accounts and other retirement vehicles, as well as IRA accounts.

So here’s what you need to know. If you have a 401k at your employer, you now have the ability to take a loan from that account of up to $100,000. Previously, that loan amount was capped at $50,000. Secondly, if your employer adopts the new regulations, you might have to tell the employer, hey, you know those letters and emails you got from the 401k provider, you need to sign them and send them back so that your employees can take advantage of this. If your employer adopts the new regulations, you can also withdraw up to $100,000 from your 401k account to pay for expenses that you might have right now in an emergency. Now, as a financial adviser, we rarely suggest that people do that unless it is truly an emergency at this time. You can do the same thing with your IRA. You can take out up to $100,000 right now as an emergency distribution.

In the case of both the 401k and the IRA, there is no 10% penalty, even if you’re under 59-1/2. In the law right now, will allow you to pay the taxes because you do have to pay taxes on these distributions over a three year period of time and not all at once. So you get some major, major benefits from the CARES Act, if you have an emergency and you need to take money out of your plan. If your spouse has a plan, you could conceivably, if you needed it, get up to $200,000 from your plan, because you’ve taken $100,000, and $100,000 from your spouse’s plan.

The last thing that I’m going to share with you is that you have the ability this year to not take an RMD. If you’re over age 72 and you are normally required to make a required minimum withdrawal from your IRA, the law now says that only in 2020, you don’t have to make that RMD, whether it is for a traditional IRA, a Roth IRA, which doesn’t require an RMD, or a beneficiary IRA where you’ve inherited an IRA from someone else.

Finally, if you haven’t thought about it, this is a great time to consider converting traditional IRAs to Roth IRAs. We can explain why, but if you want to have a lot more money in retirement that comes to you tax free, it’s a great strategy. I’m Cary Stamp. This has been a Principled Wealth Moment.