The CARES Act: Part 1
We hope all of you are healthy and at home as we begin the month of April. We are all working from home so don’t hesitate to continue to reach out!
We are all starting to study the new CARES Act so we want share what we have uncovered thus far. We have labelled this post as Part 1 because we are sure there will be more to come on this topic but let’s get started!
First of all CARES stands for Coronavirus Aid, Relief and Economic Security Act. The bill itself is over 800 pages long and has economic provisions for individuals, small and large businesses, state and local governments, public health and education/other.
There are implications for RETIREMENT PLANS which we want to summarize for you. These pieces apply to all, regardless of whether you have been impacted directly by the virus. There are other components of the Act which apply at this point only to those directly impacted.
RMDs (Required Minimum Distributions) have been suspended for 2020:
This suspension includes inherited IRA’s
There will be no penalty assessed if the distribution is eliminated in 2020
Obviously the majority of retirees need this money for living expenses and will need to take the 2020 distribution anyway
If you have already taken your 2020 RMD, but don’t need the cash for living expenses in 2020:
You have 60 days to return the dollars to a retirement account without paying the taxes
We are not yet sure how Ameritrade will want to handle this transaction so let us know if you are interested in pursuing
You can also convert this distribution to a Roth IRA and pay the taxes as you had planned. Again, call us if you are interested in doing this.
For those of you who aren’t subject to RMDs, but might want to take advantage of provisions in the CARES Act:
The deadline for making 2019 contributions to an IRA of any type has been extended to July 15, 2020 to coincide with the federal tax filing deadline extension. We need to ensure that the contributions gets coded to the correct year so let us know if you want to do.
Roth IRA Conversions are “on sale” right now. This is a great long term strategy for those of you who have traditional IRA’s and some cash. In short, if you convert a traditional IRA to a Roth IRA this year, you pay the taxes on the full amount you are converting in 2020, but then the Roth grows completely tax free forever – for you or your heirs. You can convert as much or as little as you would like so let us know if you want to discuss.
There are more provisions for additional distributions from IRA’s and loans/distributions from 401K’s. At this point, these pieces require proof of direct impact from the virus, including job loss. We can help work through these options with you if needed.
Again, most important thing is to stay healthy! We are here!