Changes to Retirement Accounts Adding Flexibility for Investors
Today President Trump signed into law a new bill that provides over $2 Trillion dollars of stimulus to the United States economy and provides some important flexibility for investors.
Unique Changes to Retirement Account Rules as part of the $2 Trillion Coronavirus-Stimulus Package
- IRA Required Minimum Distributions (RMD) are suspended for 2020. Investors who have not yet taken their 2020 RMD can choose to forego the distribution and allow their assets to remain invested. This is beneficial for investors with equity allocations, as they’re able to avoid selling at depressed equity prices.
- With respect to their retirement accounts, people under the age of 59½ who have been affected by the coronavirus crisis can withdraw to up to $100,000 of their retirement savings penalty-free. Normally investors younger than 59½ would pay a 10% penalty for distributions taken from their IRAs and 401(k). Note that normal income taxes on distributions from retirement accounts still apply, however the relief bill adds the ability to defer the full amount of the taxes and instead pay them over 3 years.
- In order to qualify for the hardship distribution, the account owner or their spouse or dependent must have been diagnosed with coronavirus or lost income due to a layoff, business closure, quarantine, reduction in hours, or inability to work due to lack of child care.
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