The CARES Act and tapping your 401k
Christy Bieber cautions against knee-jerk reactions such as withdrawing or borrowing from a 401k to make ends meet during this pandemic. However, she discusses relief for Americans who may need to do either in the recently passed CARES Act. Those who need to take money out in 2020 because of financial hardship caused by coronavirus can take out up to $100k without facing the normal 10% penalty. Further, you can pay taxes associated with your distribution over three years instead of all at once. The CARES Act also allows you to recontribute money withdrawn from your 401(k) to an eligible retirement plan within three years without the amount counting toward annual contribution limits. Finally, on borrowing against a 401k, the CARES Act changed the rules on taking out a loan from no more than $50k or 50% of the vested account balance to the lesser of $100k or 100% of your vested account balance. Read the downsides and other options that should be considered in the full article here.