CARES Act 401K Withdrawal: What You Need To Know
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The CARES Act makes it easier to take money out of your 401(k) or IRA. Here is exactly what you need to know before you do. Enjoy! Add me on Instagram: beck.zack
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Prior to this illness, if you were under age 59½, taking a distribution from your 401(k) would trigger a 20% federal tax hit and a 10% early distribution penalty. That was, and will again be after 2020, a very steep price to pay for years of stocking away savings for your future.
An individual can now take a withdrawal of up to 0,000 from eligible retirement plans, including 401(k) plans and IRAs, without the 10% penalty applying.
The IRS recently released guidance broadening the number of people who can take illness-related distributions from 401(k) plans and IRAs.
These distributions are only available in 2020. Note that while the 10% penalty has been temporarily waived, the tax liability on the distribution has not. You will have up to three years to pay the tax liability on the amount of your distribution.
Now that the rules on distributions have changed temporarily, the question becomes should you do it, because you could do it? Accessing retirement accounts still should remain a last resort.
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