Highlights of the CARES Act

By Tim Hilterman, CFP, CAP, Investment Advisor Representative

March 30, 2020

CARES Act for Individuals
On Friday, congress passed, and the President signed into law, the Coronavirus Aid, Relief and Economic Security (CARES) Act. In addition to providing support to small businesses, the bill provides measures to help individuals and families like you. Here are some of the highlights:


No RMDs in 2020
That’s right, Required Minimum Distributions (RMDs) are suspended for 2020. Typically there is a 50% penalty if one doesn’t take their RMD, but this will not be the case in 2020. This provision means savers won’t have to sell out of investments at low levels in order to take their RMD.


Early Access to Retirement Savings
For those who might need to access funds in retirement accounts, the CARES Act is providing these special options:

  • The 10% early withdrawal penalty on retirement account distributions has been waived, along with the 20% mandatory tax withholding for virus-related distributions.
  • These distributions are still considered taxable income, but you have the option to pay the income tax over 3 years.
  • You also have the option to recontribute these funds back into the retirement account within three years and these recontributions will not be counted against the annual maximum of the plan.
  • This applies to IRAs, 401(k)s, certain deferred comp plans and several others.
  • There is a $100,000 cumulative maximum across all plans and IRAs.

While these measures may help you meet basic needs we would encourage you to use this a last resort. Any funds that are removed from your retirement account won’t be participating in the eventual recovery in the market, and you will still owe tax on the distributions. Please let us know if we can help you decide if this would be the right option for you.


Stimulus Checks
Most individuals earning less than $75,000 will receive a one-time cash payment of $1,200 and married couples earning less than $150,000 will receive $2,400. In addition, families will get $500 per child. Those making more than these amounts will see a smaller check and the payments will disappear altogether for individuals making more than $99,000 and couples making more than $198,000.

Federal Student Loan Payments Suspended
That’s not a typo. For those who hold a federal student loan, you do not have to make any payments through September 30th. There will be no late fees and no interest will accrue during this time. This does not apply to private student loans.

We’re continuing to monitor the changes brought about by these unique times. We are ready and available to help. Please reach out to us if we can be of service.

Keywords: cares act, covid19
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