How the COVID-19 CARES Act Affects Your Retirement

Shannon B. says:

I read that due to COVID-19, the 10% penalty for withdrawing from retirement accounts will be waived. I’m wondering if this includes IRAs. And since I’m financially affected by the pandemic, would you recommend that I withdraw funds from my Roth IRA, which has $2,500, to pay bills?

Joyce asks:

Is the government letting retirees not take an RMD (required minimum distribution) in 2020 due to the stock debacle?

Jessica T. says:

I’m 26 years old and started a new job this January, but I don’t qualify for the 401(k) until I’ve been employed for a year. I was planning on starting a Roth IRA and possibly an investment account, but then the market became unstable due to COVID-19. When would be a good time to start investing in those accounts?

Thanks for your questions, Shannon, Joyce, and Jessica. It’s important to understand how new legislation relaxes retirement account rules—plus, the benefits of continuing to make contributions if you can.

Life has been changing quickly, and each week there seems to be a new policy response to deal with the spreading coronavirus. Congress has passed three bills to help Americans cope with the economic fallout of COVID-19:

1. The Coronavirus Preparedness and Response Supplemental Appropriations Act became law on March 6 and authorized funding for activities including health care research and domestic and international response efforts.
    
2. The Families First Coronavirus Response Act became law on March 18 and expanded benefits for workers, including paid sick and family leave, unemployment insurance, and protections for those in the health care workforce.
    
3. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, the largest stimulus legislation in American history since the New Deal in the 1930s, became law on March 27. It provides a variety of relief for individuals and businesses, including funds for various loans and grants, stimulus payments for taxpayers, suspension of payments and interest on federal student loans, and provisions that make it easier to access retirement funds.

That’s just the tip of the iceberg on what these laws provide. In this post, I’ll focus solely on ways the CARES Act affects your retirement account and answer the questions my...

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