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The $2 trillion stimulus bill that was recently signed to help Americans amid the coronavirus pandemic includes provisions for retirement accounts. It’s crucial for you to be aware of these changes as you work with your senior clients during this time.
The CARES Act has waived the 10% early distribution penalty for those directly affected by the virus. Thus, impacted individuals under age 59 ½ can withdraw up to $100,000 of their retirement funds without the typical penalty. The law also allows 401k participants to take out loans to the lower of $100,000 or 100% of the account balance, which is double the typical allotment, for the next six months.
These new rules apply to those who have lost a job or experienced financial hardship due to COVID-19 as well as those who have been diagnosed with the virus or whose spouse has been infected.
While these provisions are important to those struggling financial who have no other resources during this time, encourage your clients to think carefully before taking advantage.
The law also suspends required minimum distributions (RMDs) for retirees and those who have inherited IRAs during 2020. This may be appealing to plenty of retirees due to market fluctuations. Additionally, skipping a full year of RMDs can help them recover the investment and minimize the tax impact of the distributions.
Read the full article from USA Today.READ MORE