By now, the major coronavirus relief programs put in place by the CARES Act in March – Pandemic Unemployment Assistance, the Paycheck Protection Program, Economic Impact Payments, etc. – have been well-covered.
But there’s a lot more to the $2 trillion stimulus bill, the largest in U.S. history, and there are a few lesser-known sections that can provide an addition lifeline for those whose cashflow has dried up during this economic crisis.
Hardship Retirement Savings Withdrawal
Generally, a withdrawal from a retirement savings account like an IRA or 401(k) before the age of 59 ½ is subject to a 10% penalty fee, on top of the income tax that must be paid on the funds. Under the CARES Act, this penalty fee is being waived on withdrawals of up to $100,000 from retirement accounts between Jan. 1 and Dec. 31, 2020.
There are different tax implications to be aware of for an IRA and a 401(k) withdrawal. In addition, the $100,000 is an aggregate limit for all retirement plans. You’ll still owe income taxes on the money you take as a distribution, but you’re allowed three years to pay the taxes or pay back the money you withdrew into your retirement account.