When you save for retirement, the goal is to keep the money growing until you are of retirement age. But sometimes unexpected financial crises arise, as is the case with many people due to the pandemic.
The CARES Act, which was signed into law in March, offers some relief with expanded withdrawals from IRAs and retirement plans and expanded loan options from certain retirement plans.
You are eligible for these relief options if you, your spouse or another member of your household:
- Is diagnosed with COVID-19.
- Suffers adverse financial consequences as a result of COVID-19. That might include being quarantined or furloughed, having work hours reduced, having a reduction in income, or having a job offer delayed or rescinded.
- Has a business they own or operate close or require reduced hours due to COVID-19.
Under the law, eligible individuals may be able to withdraw up to $100,000 from their IRA or workplace retirement plan before Dec. 31, 2020, assuming it’s allowed under their plan.
Such withdrawals will not incur the 10 percent penalty that typically applies to withdrawals before age 59 1/2. You may choose to have the withdrawal included in your taxable income over a three-year period, or in the year you make the withdrawal.
The withdrawals are not subject to mandatory tax withholding, and they may be repaid to your
IRA or retirement plan within three years.