Understanding the CARES Act Taking Money Out Still Means Putting Money In
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted to help Americans cope with the financial fallout that has occurred during the COVID-19 outbreak. It makes it easier to withdraw funds saved in tax-advantaged accounts like IRAs and 401(k)s, and hundreds of thousands of qualified individuals have already taken advantage of it. As the economy continues to seesaw and you find yourself not already having taken advantage of the CARES Act, now could be a great time to consider doing so. Savers under age 59 1/2 can withdraw up to $100,000 from their 401(k), 403(b), and individual retirement accounts without the usual 10% early withdrawal penalty. But it’s a double-edged sword. People are being given access to their assets during a time when they need the extra support for everyday expenditures, but there are
consequences to taking that money out during a volatile market. It takes a long time to build up a nest egg of $100,000. Every dollar taken out is one more dollar you have to figure out how to put back in. And contrary to popular belief, there are still taxes to consider. Normally, these retirement plan withdrawals would be subject to income taxes plus the 10% penalty for withdrawing before age 59 1/2 — the CARES Act gives grace on the penalty, but you still have to pay income taxes this year or over a three-year period. If you repay the funds you withdrew within that three-year period, however, you won’t be subject to these taxes. The bottom line is that there are both advantages and disadvantages to utilizing the capabilities the CARES Act aims to provide, so long as you play it smart.
Consider your budget first and take out only what you need. If you don’t need the maximum, don’t take it out. If you qualify, Wolf Retirement Navigation can assist you in the process of moving money out of your 401(k) and into an IRA to use now or not use, as long as the funds removed from the 401(k) are moved back into a tax-deferred qualified plan. If you have questions about what your best options are, give us a call at 904-232-8760 today.
SUDOKU
Skip the can-shaped cranberry sauce this year and bring a jar of homemade sauce to Thanksgiving instead. This easy recipe can be made ahead of the big event and keeps for 10 days in the fridge.
INGREDIENTS
• 1/2 cup orange juice, freshly squeezed
• 12 oz fresh cranberries
• 2 tsp orange zest
• 1/2 cup water
• Salt to taste
• 3/4 cup plus 2 tbsp sugar
DIRECTIONS
1. In a medium saucepan, heat the orange juice, water, and sugar to a boil. Add other ingredients, then bring mixture back to boiling. 2. Reduce the heat to medium and cook gently for 10–12 minutes, until the cranberries burst.
3. Transfer the sauce to a bowl or jar, cover, and refrigerate until serving.
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