Bridgeriver LLC - July 2020

Nest Egg


JULY 2020

The Secrets of the CARES Act

And How You Can Take Full Advantage of It

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law in March. It was a $2 trillion economic relief package that made money available to individuals and businesses. While the coronavirus pandemic has been tragic and many people have fallen ill and lost loved ones, there are many relief efforts you can take part in, including the CARES Act — and it goes beyond collecting a check from the Federal Reserve. I’ve scoured the CARES Act and found a few details that can provide extra relief or certain tax advantages to those with retirement accounts, such as an IRA or 401(k). The IRS established a set of rules detailing what you can and cannot do in regards to retirement accounts in the wake of the coronavirus. But they left those rules extremely broad. Essentially, anyone affected by the coronavirus can take advantage of what I’m about to share with you. But always consult with your finance, tax, or legal professional before moving forward. Here’s how it breaks down: If you have a 401(k) (and the way I understand it, also a 403(b) or a 457 Plan), you can take a loan of up to $100,000 or 100% of the account’s balance, whichever is lower. This new rule is in effect until Sept. 23, 2020. If you choose to take a loan from your 401(k), then you have five years to pay it back. You could technically start repaying it right away, if you choose, using paycheck contribution, which might be something worth considering. Here’s the cool thing about the 401(k) loan: As you repay the loan, you can choose to repay $20,000 a year over five years. Plus, you can contribute your normal amount — a max of $19,500. So, if you want, you can contribute a total of $49,500 to your 401(k).

You can also withdraw $100,000 without penalty from either an IRA or 401(k). You will have to pay taxes on that withdrawal but you can spread that tax bill over three years (April 2021, 2022, 2023), so you need to look at your income status and plan accordingly. That said, you don’t necessarily need to pay those taxes out of pocket. With a little strategizing, you may be able to pay taxes with investment gains. In other words, you can take that $100,000 from your 401(k) or IRA and reinvest how you choose. Then, you could take the gains and put it toward payment of the taxes. You can also choose how and when you repay your accounts. You can repay them in installments over the three- or five-year period or you can repay them at the end of those periods. For instance, if you withdraw $100,000 from your IRA and invest it then wait three years to repay, you maximize the gains on that $100,000. If you have questions about the CARES Act or getting the most out of your retirement accounts during the coronavirus, then give us a call and we’ll answer your questions. You can also visit to sign up for my webinar on the CARES Act and learn how you can benefit from it. As of this writing, I’m doing the webinar live so you can ask questions and get answers in real time.

-Dan Casey



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