Home|Our Services|Our Philosophy|Client Center|Planning Ideas|Resources|Disclosure|Contact Us

Financial Briefs

More Articles  Printer Friendly Version

 

New Covid Aid Law Waives 10% Penalty On Pre-59½ Retirement Plan Withdrawals

The new $900 billion Covid relief package is the fifth major federal law enacted in response to the COVID pandemic and economic crisis, and the first since April. Apart from funding the new relief, Congress sensibly expanded on previous aid legislation by targeting individuals, families, and small businesses hit hardest financially.

4868 1

A major change in the new aid package allows withdrawal of up to $100,000 from your retirement plan penalty-free, even if you’re less than age 59½. Normally, a 10% federal tax penalty is assessed on distributions from a qualified retirement plan if you’re younger than 59½, but the penalty is waived in 2021.

If your financial situation improves, you may restore the withdrawn amount for up to three years. So it’s like loaning yourself money for up to three years. Of course, you lose the compound growth on that money.

Withdrawals from a retirement account is never a great idea, even if it is a loan that you pay back. However, if you are not meeting your expenses and in danger of losing your home, a withdrawal or loan may be a good option.

If you are withdrawing money from a retirement account before age 59½ to keep your business from bankruptcy or for some other reason, it’s wise to assess the risk versus reward with a critical eye. Business owners sometimes need an objective opinion to avoid chasing a dead dream, and qualified retirement plan assets are not subject to creditor claims in the event your business goes bankrupt.

Feel free to ask us about the new Covid relief rules permitting penalty-free withdrawals of up to $100,000 on qualified retirement plans before you’re 59½, or if you are weighing the risk and reward of a pre-59½ retirement plan withdrawal.

Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. It does not take into account your investment objectives, financial or tax situation, or particular needs. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. The material represents an assessment of financial, economic and tax law at a specific point in time and is not a guarantee of future results.


Email this article to a friend


Index
Two Observations That May Make Higher Taxes Easier To Bear
John Oliver's Economic Analysis Is No Joke
Are You A Risk To Your Financial Health?
News Analysis: Today’s Testimony By The Fed Chair And Treasury Secretary
Pandemic Financial Pain Is A Thing
Capitalizing On Current Financial Economic Trends
The Cost Of Not Having A Financial Plan Is Surging
Equity Risk Premium Grew Wider And More Important
The Facts Amid Rising Fears Of Inflation
New Identity Fraud Tactic Targets Amazon Prime Users
A Professional Perspective On 2020, The Cruelest Year
Viewing Financial News Through The Long Lens Of History
Act Before Hitting The Crossroad Of Fiscal And Tax Reality
The Bull Market Broadened Recently
An Important Investment Idea To Remember In 2021

This article was written by a professional financial journalist for William Howard & Co. Financial Advisors, Inc. and is not intended as legal or investment advice.

©2021 Advisor Products Inc. All Rights Reserved.
© 2021 William Howard & Co. Financial Advisors, Inc. | International Place II | 6410 Poplar Avenue, Suite 330, Memphis, TN 38119 | All rights reserved
P: 901-761-5068 | F: 901-761-2217 |
Disclosure | Privacy Policy | Contact Us | ADV Part 3 |