Tax-Free IRA Withdrawal Up To $100,000
For those among the newly-reported record number who lost jobs in April, a reminder about one piece of the federal government’s package of economic relief measures may be in order. That piece provides that qualified individuals may withdraw funds from an IRA account, or other retirement investments, without penalty, and possibly without tax liability as well.
The CARES Act (Coronavirus Aid, Relief, and Economic Security Act), enacted in late March in response to the economic impact of the pandemic, not only doubled the amount individuals can withdraw or borrow from their IRA accounts (raising it to $100,000 per person), but it eliminated early withdrawal penalties and it provided a way to avoid all tax consequences for withdrawing the money, if the funds are re-deposited over the three years following the withdrawal. While employment-based retirement plans, such as 401k accounts, are still subject to employer limitations, the act included favorable treatment for withdrawal from those accounts too.
To help achieve its purpose, the act was written to provide taxpayers with great freedom. Funds can be withdrawn from and re-deposited into multiple and different IRA accounts. Both withdrawals and re-deposits can be made in stages over the time period allowed (this year for withdrawals, and over the next three years for re-payments). And there is no limitation or restriction on what the withdrawn funds may be used for. For those of a different age and in a different economic posture, the act also waived the requirement for required minimum distributions from retirement investments.
While we generally caution clients about withdrawing retirement funds before retirement age, partly due to the tax consequences of doing so, we regularly find situations where doing so makes sense. In the current and most unusual circumstances, including the effect of the CARES Act, you may want to consider your options and talk with an attorney, a tax advisor and a financial planner about them.
At LaMonaca Law, we have always worked hand-in-hand with our clients and now, by way of our Virtual LaMonaca Law presence, we still do, virtually. We make sure our clients, and everyone who turns to us for help, understand the stimulus relief package and position themselves to get the greatest advantage from its implementation.
This space will present additional information on these topics and we invite and appreciate your attention to these posts. If you have any questions about the new laws and the relief available, IRA withdrawals, or any other measure that might provide you benefits, or if you simply need to talk about any aspect of your family’s financial circumstances, please call for a member of our Forensic Support Team at 610-892-3877.