The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress to help businesses and individuals who are facing financial hardship due to the COVID-19 pandemic.
Part of the bill is intended to help Americans with their retirement planning.
The first notable way it may help on this front is by suspending required minimum distributions (RMDs) for the remainder of 2020:
The provision is very broad and is not a push off to 2021 – you will not have to take two RMDs next year. In essence, you do not owe any RMDs for 2020, inherited or otherwise.
The same article from Forbes continued by explaining the benefits of this change to those that would normally need to take an RMD:
They still have the flexibility to pull out as much money as they need from their retirement accounts in 2020, they just aren’t required to take out anything.
As market volatility continues in 2020, this rule could be helpful to many. Retirement savers could “ride out” the remainder of this year without having to reduce the amount saved in their accounts.
Another change allows self-employed individuals and business owners to defer some of their Social Security taxes until December 31, 2020.
But the Forbes piece also highlights a bit of interesting Social Security advice:
Many people over age 62 who wanted to delay Social Security, which can often be the best overall retirement income strategy to maximize long-term Social Security benefits, may want to consider claiming benefits sooner.
Whether you choose to consider claiming your benefits or not, you should know that it is a possibility if you’re suffering economically due to the virus.
And if you’ve been laid off, had hours reduced, were quarantined or suffered any of the conditions in Section 2202 of the bill, the Forbes article notes that you could withdraw funds from your retirement without paying the taxes normally associated with early withdrawal:
Up to $100,000 can be withdrawn from a retirement, exempt from the 10% penalty tax if the distribution is taken before age 59.5. A retirement plan can rely on a participant’s written statement that he or she meets the conditions.
Of course, these changes are helpful. But one question remains…
Are the CARES Act Provisions Helpful?
In addition to 401(k) changes in Section 2202, and charitable donation changes in Section 2204, there are many other items buried in the 880-page Act that could help retirement savers.
As with most bills created by politicians, the “intention” behind them sounds good when they are selling their packages of legislation. But in order to find the few nuggets of real benefit, you have to sort your way through hundreds to thousands of pages of legal language. And to begin with, it usually takes forever and a day to pass the legislation.
By the time a citizen can gain any benefits from a bill (if there are any “real” benefits), too much time has passed.
Plus, when you consider that deferred taxes and shifting dates only does so much, what you’re left with isn’t likely to help for long.
If that’s all the Government can do for you, it may be a good idea to see what you can do for yourself.
Take Back Control of Your Retirement
Now is the time to consider actions like examining your retirement account’s exposure to risk and diversifying your assets into new funds and asset classes.
One example would be to consider physical assets like gold and silver, which are doing quite well at the moment. They both can provide peace of mind by helping to reduce risk in your portfolio while acting as a store of real value.