Life has thrown us a curveball, and we’re trying to figure out what to fix first. Enter the CARES Act.

Our minds are in constant overload as we chase down solutions to all the things we used to do so easily. Everything from working to eating to just plain living.

Just a month ago, everything was under control. Today it feels like nothing is.

A big question is, “Where is the money coming from to wait this out?”

The fiscal stimulus bill promises some payouts, but the timing isn’t clear at all. And will the payouts be enough?

What other resources do we have? What backup? How can we stay afloat as we navigate our way through the economic uncertainty brought on by the COVID-19 pandemic?

What about my retirement accounts?

It’s too early to know how the markets will play out, and how long it will take to get your IRAs and 401(k)s back up to healthy levels.

What you do know is that you should avoid touching them – if possible – while the asset values are so low. You’ll be locking in the losses by taking shares out at such a low price.

But what if you have to?

Is there anything in the new CARES Act that can help?

If the combination of lost income and new expenses leaves you no choice but to tap into your traditional or Roth IRAs – or your 401(k)s – as a bridge, at least the new stimulus bill can soften the blow.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law on March 27, 2020, has some powerful provisions.

But first, a definition. In the Act, “hardship” refers to anyone diagnosed with coronavirus or who has a spouse or dependent who has been diagnosed. It also refers to anyone experiencing “adverse financial consequences” from this pandemic, which almost everyone is. And that includes you.

So, what are its provisions?

You can take a hardship distribution from your IRAs and workplace plans of up to $100,000 total.

  • You don’t have to pay the 10-percent penalty for early withdrawal if you are below age 59½.
  • The mandatory withholding requirements of 20 percent on employer-sponsored accounts are waived.
  • Whatever you withdraw, you can roll back into a qualified retirement account within three years, and the usual contribution caps won’t limit you.
  • Whatever you don’t replace, you will take as income and spread it out as income over 2020, 2021 and 2022. You’ll be taxed at ordinary income tax rates.

You can take a standard loan from employer-sponsored accounts of up to $100,000.

  • The loan amount no longer has to be less than half the vested account balance.
  • The 10-percent early-withdrawal penalty (if you’re below age 59½) is waived.
  • Payments due through the end of 2020 on new or existing loans may be delayed for up to one year.

If you’re required to take RMDs from IRAs and other tax-advantaged retirement accounts – whether yours or inherited – you’re in luck.

  • You have a temporary waiver on having to take any RMDs due in calendar year 2020.
  • You can return RMDs you’ve already taken in 2020, even if taken before the Act was signed.
  • Distribution calculations are based on the value of your holdings on December 31 of last year – when the markets were high – so avoiding RMDs in 2020 is a good thing.

Touching your retirement accounts is not ideal for many reasons, including how it can put your retirement nest egg at risk. But curveballs happen. And we’re experts at dealing with them. If we can be that calm, knowledgeable voice that helps you use your resources wisely in this time of uncertainty, give us a call.

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