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Message
Cares act allows withdrawal from retirement account
Posted on 8/4/20 at 7:42 am
Posted on 8/4/20 at 7:42 am
The taxes can be spread over three years and there is no penalty. In my current 403b i am limited to certain funds available from fidelity. If I withdraw my balance and put these funds in an IRA (where I can choose more specifically how they are invested).. is the taxable event minimized?
3
Posted on 8/4/20 at 9:11 am to LChama
I will jump in with a question as well if you don't mind.
Does this apply to a non company sponsored IRA's? I am def. not going to touch my 401-k, but I have an IRA that I had rolled a previous 401-k into that I may consider taking a distribution from.
Does this apply to a non company sponsored IRA's? I am def. not going to touch my 401-k, but I have an IRA that I had rolled a previous 401-k into that I may consider taking a distribution from.
Posted on 8/4/20 at 9:36 am to LChama
I am not sure about a 403B but form 401K if it is transferred directly to IRA there is no tax due until you take a distribution to yourself.
Posted on 8/4/20 at 9:47 am to jerryc436
quote:
401K if it is transferred directly to IRA there is no tax due until you take a distribution to yourself.
Does this mean I could transfer out of my employer’s crappy 401K into my much more flexible IRA with no penalty right now?
Posted on 8/4/20 at 9:54 am to BillyGibbons
quote:
Does this mean I could transfer out of my employer’s crappy 401K into my much more flexible IRA with no penalty right now?
Basically my question in OP
Posted on 8/4/20 at 10:16 am to BillyGibbons
The CARES act basically has a special provision for hardship withdrawals.
At this point, you have to meet one of 5 requirements to get a corona-distribution
You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;
Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;
You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;
You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or
You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.
These are in the law. IRS may expand that list in the future.
Plans are NOT required to do any of this. It's simply something the law will allow as an option.
You can't execute a direct rollover with this. In theory, you can take a corona-distribution, have it designated as such, and when you re-pay it, it will be deemed to be similar to a trustee to trustee distribution, so no need for withholding. However, if you want to put it into a different plan than the one you took it from, you will need to find a new plan willing to accept such contributions (I'm sure you will be able to).
Qualified plan for this issue involves 401k, 403b, IRA.
Absent all of this, if your plan allows for in-service distributions, you may be able to do a rollover under those rules.
At this point, you have to meet one of 5 requirements to get a corona-distribution
You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;
Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;
You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;
You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or
You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.
These are in the law. IRS may expand that list in the future.
Plans are NOT required to do any of this. It's simply something the law will allow as an option.
You can't execute a direct rollover with this. In theory, you can take a corona-distribution, have it designated as such, and when you re-pay it, it will be deemed to be similar to a trustee to trustee distribution, so no need for withholding. However, if you want to put it into a different plan than the one you took it from, you will need to find a new plan willing to accept such contributions (I'm sure you will be able to).
Qualified plan for this issue involves 401k, 403b, IRA.
Absent all of this, if your plan allows for in-service distributions, you may be able to do a rollover under those rules.
Posted on 8/4/20 at 12:11 pm to LSUFanHouston
I had an old 401k from a former employer that I used this distribution on. From the Transamerica rep, the employer sponsored plan has to allow this withdrawal to use this option.
Posted on 8/4/20 at 11:41 pm to BillyGibbons
quote:
right now
If you are doing a rollover (properly), then you wouldn't pay that penalty regardless.
Posted on 8/5/20 at 12:00 am to BillyGibbons
quote:
Does this mean I could transfer out of my employer’s crappy 401K into my much more flexible IRA with no penalty right now?
Yes, I have done it, just never have the funds payed directly to you.
Posted on 8/5/20 at 4:53 am to LChama
quote:
If I withdraw my balance and put these funds in an IRA (where I can choose more specifically how they are invested).. is the taxable event minimized?
Yes. If you do the full 100k out and the full 100k into your IRA within 60 days, no tax.
This post was edited on 8/5/20 at 4:53 am
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