Distributions
can be waived in 2020 for Inherited Accounts, 401(k)s, and IRAs.
Provided by Taylor McClish
Recently, the $2
trillion “Coronavirus Aid, Relief, and Economic Security” (“CARES”) Act was
signed into law. The CARES Act is designed to help those most impacted by the
COVID-19 pandemic, while also providing key provisions that may benefit
retirees.1
To put this
monumental legislation in perspective, Congress earmarked $800 billion for the
Economic Stimulus Act of 2008 during the financial crisis.1
The CARES Act
has far-reaching implications for many. Here are the most important provisions
to keep in mind:
Stimulus
Check Details. Americans can expect a one-time direct payment
of up to $1,200 for individuals (or $2,400 for married couples) with an
additional $500 per child under age 17. These payments are based on the 2019
tax returns for those who have filed them and 2018 information if they have
not. The amount is reduced if an individual makes more than $75,000 or a couple
makes more than $150,000. Those who make more than $99,000 as an individual (or
$198,000 as a couple) will not receive a payment.1
Business
Owner Relief. The act also allocates $500 billion for loans,
loan guarantees, or investments to businesses, states, and municipalities.1
Your
Inherited 401(k)s. People who have inherited 401(k)s or
Individual Retirement Accounts can suspend distributions in 2020. Required
distributions don’t apply to people with Roth IRAs; although, they do apply to
investors who inherit Roth accounts.2
RMDs
Suspended. The CARES Act suspends the minimum required
distributions most people must take from 401(k)s and IRAs in 2020. In 2009,
Congress passed a similar rule, which gave retirees some flexibility when
considering distributions.2,3
Withdrawal
Penalties. Account owners can take a distribution of up to
$100,000 from their retirement plan or IRA in 2020, without the 10-percent
early withdrawal penalty that normally applies to money taken out before age
59½. But remember, you still owe the tax.4
Many businesses
and individuals are struggling with the realities that COVID-19 has brought to
our communities. The CARES Act, however, may provide some much-needed relief.
Contact your financial professional today to see if these special 2020
distribution rules are appropriate for your situation.
Taylor McClish may be reached at (503) 239-3060 or Taylor.McClish@cunamutual.com
This material was prepared by MarketingPro, Inc., and does not
necessarily represent the views of the presenting party, nor their affiliates. This
information has been derived from sources believed to be accurate. Please note
- investing involves risk, and past performance is no guarantee of future
results. The publisher is not engaged in rendering legal, accounting or other
professional services. If assistance is needed, the reader is advised to engage
the services of a competent professional. This information should not be
construed as investment, tax or legal advice and may not be relied on for the
purpose of avoiding any Federal tax penalty. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.
Under the CARES act, an accountholder who already took a 2020
distribution has up to 60 days to return the distribution without owing taxes
on it. This material is not intended as tax or legal advice. Please consult
legal or tax professionals for specific information regarding your individual
situation. Under the SECURE Act, your required minimum distribution (RMD) must
be distributed by the end of the 10th calendar year following the year of the
Individual Retirement Account (IRA) owner's death. Penalties may occur for
missed RMDs. Any RMDs due for the original owner must be taken by their
deadlines to avoid penalties. A surviving spouse of the IRA owner, disabled or
chronically ill individuals, individuals who are not more than 10 years younger
than the IRA owner, and children of the IRA owner who have not reached the age
of majority may have other minimum distribution requirements.
Under the CARES act, an accountholder who already took a 2020
distribution has up to 60 days to return the distribution without owing taxes
on it. This material is not intended as tax or legal advice. Please consult
legal or tax professionals for specific information regarding your individual
situation. Under the SECURE Act, in most circumstances, once you reach age 72,
you must begin taking required minimum distributions from a Traditional
Individual Retirement Account (IRA). Withdrawals from Traditional IRAs are
taxed as ordinary income, and if taken before age 59½, may be subject to a 10%
federal income tax penalty. You may continue to contribute to a Traditional IRA
past age 70½ under the SECURE Act, as long as you meet the earned-income
requirement.
Accountholders can always withdraw more. But if they take less than
the minimum required, they could be subject to a 50% penalty on the amount they
should have withdrawn – except for 2020.
Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.
Citations.
1 - CNBC.com, March 25, 2020.
2 - The Wall Street Journal, March 25, 2020.
3 - The Wall Street Journal, March 25, 2020.
4 - The Wall Street Journal, March 25, 2020.