Recently the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. There are a few important items that may impact retirees.
Required Minimum Distributions
For 2020, Required Minimum Distributions (RMDs) have been waived for all retirement accounts, including IRA, 401(k), 403(b), and 457 plans. This includes beneficiary IRAs as well. If you were in the category where you were required to take two RMDs in one year due to delaying your first RMD, you happen to be in luck – no RMD is required.
No 10% Penalty For Early Retirees
For early retirees that qualify for “coronavirus-related distributions” (an intentionally broad definition), if you took out money prior to age 59 ½ or 55 depending on the type of retirement account, you were potentially subject to a 10% penalty. For 2020 you may now take up to $100k out of your pre-tax retirement accounts without penalty. You are still subject to reporting your distributions as income, though you are allowed to stretch the recognition of this income over three years.
Stimulus Payments for Tax Filers
For those that earn under $75,000 in adjusted gross income for singles and $150,000 for married filers, they will receive direct payments from the government in the amount of $1,200 (single) or $2,400 (married). This will be sent via direct deposit for those that have set up ACH, and a check will be sent to those that do not have that established. There is a phaseout for those earning above $75k/$150k, ending at $99k for single filers and $198k married.