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THE CARES ACT AND YOUR RETIREMENT SAVINGS

THE CARES ACT AND YOUR RETIREMENT SAVINGS

THE CARES ACT AND YOUR RETIREMENT SAVINGS

The country is several weeks into the implementation of  The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the $2 trillion legislation designed to fast track direct economic assistance for American workers and families, small businesses, and preserves jobs for American industries. The CARES Act, signed into law on March 27, has strong implications for those with retirement savings plans.

Since some retirees are still trying to understand how their own retirement savings are affected by the legislation, here is a quick refresher on how The CARES Act might affect some of your decisions going forward.

  • The 10 percent penalty for early withdrawal from your 401(k), 403(b) will be waived now if you are suffering financial hardships from the pandemic.
  • The CARES Act allows you to have up to three years to pay the taxes on the withdrawal.
  • The Act changes the rules on taking loans from your retirement account. You can now take out a loan which is equal to the amount you have in the account. The limit for loans has been raised from $50,000 to $100,000. There are provisions in the Act to defer loan payments during the pandemic.
  • You will recall back in January the age that your Required Minimum Distribution (RMD) from your retirement account was raised from 70 ½ to 72. The CARES Act waives the RMD requirement for the entire year 2020.

There are additional provisions in the Act that directly affect retirees. Medicare now covers many telemedicine appointments. Click here to read our recent Neyland Report article on telemedicine. Also, your Medicare prescription drug coverage and your Medicare Advantage plans now 90-day refills of your medications. The Act also requires health insurance plans and Medicare to cover COVID-19 testing, and eventually vaccines. Also included in the legislation is $500 million to supplement the cost of providing home delivered meals to seniors who are sheltering in place. This bolsters the efforts of organizations such as Meals on Wheels.

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