In March, Congress passed the CARES (Coronavirus Aid, Relief, and Economic Security) Act, putting $2 TRILLION to work to help our country and the small businesses affected by the Covid-19 pandemic. Curious on how the CARES Act might affect you?

Although most Lockheed employees are continuing to work from their homes (and might not have seen a financial impact), the CARES Act does feature a few provisions that might affect employees or their families.

Funds for Taxpayers

By now, (depending on your income) you might have received some cash in your bank account as a result of the CARES Act. Individuals making up to $75,000 (adjusted gross income) received $1,200 and married couples making up to $150,000 received $2,400.

Taxpayers also received an additional $500 for each child and those above the income limits had their payments reduced by $50 for every $1,000 of income. If you haven’t filed your 2019 taxes (the deadline was extended to July 15th) then your 2018 taxes were used to figure out how much you received.

No 10% penalty on early withdrawals

Normally, those that need to access their retirement accounts (401ks, IRAs, SEP IRAs, etc.) and are still under the age of 59.5 have to not only pay income taxes on their distributions (depending on how the $ went into the accounts) but also pay a 10% early-withdrawal penalty.

The CARES Act removed the 10% penalty provision and also gave the option to avoid paying the income tax if the funds are returned to the account within three years. If you decide you can’t put the funds back into a retirement account, you also have the option to spread the taxes due on the withdrawal over a three-year-period.

Those that need to access their retirement accounts can take up to $100,000 in 2020 but the distributions do not have to be taken out all at the same time.

No RMDs in 2020

If you are over 70.5 years of age, you might be required to take withdrawals from your retirement accounts. This RMD, or Required Minimum Distribution is waived in 2020. This also applies if you are the beneficiary of a retirement account (a child of a deceased parent for example).

How do I qualify as “affected by the Covid-19 pandemic?”

The wording in the act is a little vague (maybe for good reason!). According to the IRS website, Qualifying individuals are those (or their spouses) that are diagnosed with Covid-19 by a Centers for Disease Control test.

You can also qualify if you experience “adverse financial consequences” caused by being quarantined, being furloughed or laid off, or having work hours reduced.  If you didn’t have access to child care or had reduced business hours for a business you own or operate you can also qualify.

Have questions about how the CARES Act and financial hardship might have affected your retirement outlook? Shoot me an email at Brian@TheAeroAdvisor.com and I’d be glad to help. Or you can click the button below and pick out a time to chat via phone. This is a free, 100% no-obligation phone call.

Other resources related to the CARES Act:

CARES Act Official Information Website

Assistance for Small Businesses