How the CARES Act Affects Your Retirement Account Distributions

By Sean Condon, CFP®

How the CARES Act impacts your IRA/401k

On March 27th, President Trump signed into law the largest economic stimulus package in the history of our nation.  The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides $2 trillion to help stem the economic fallout of our nationwide attempts to slow the spread of COVID-19, a novel coronavirus. The stimulus package is very broad, doing everything from strengthening the ailing airline industry to providing rebate checks to individual taxpayers, and offering forgivable loans so that small businesses can meet payroll.  In this article, we look at how the CARES Act affects retirement account distributions.

Required Minimum Distributions Waived

For those of you who have no need for the money in your retirement accounts this year, you’re in luck. The CARES Act waives required minimum distributions (RMDs) from traditional IRAs, SEP IRAs, SIMPLE IRAs, and 401(k), 403(b), and governmental 457(b) plans for the year 2020. The waiver also applies to beneficiary account owners in addition to original account owners.  Therefore, no one has to take RMDs for 2020. 

This waiver even applies to those who were supposed to take their first RMDs in 2019 but chose to put it off until 2020.  Any RMDs that were supposed to be taken in 2020 no longer have to be taken.

What if you have already taken your 2020 RMD?  You can put it back.  Owners had until August 31 to simply put their RMD back into their IRA to reverse any taxable income.  If you missed the window, you can potentially put it back in as a qualified coronavirus-related distribution, as explained below.

Coronavirus-Related Distributions

For those of you who need money from your retirement accounts, even if you haven’t reached retirement age yet, the CARES Act has you covered as well.  The stimulus bill provides special rules for coronavirus-related distributions of up to $100,000 from IRAs and employer-sponsored retirement plans.  To be considered coronavirus-related, the distribution must be made in the year 2020 by people who have either:

  • Have been diagnosed with COVID-19
  • Have a spouse or dependent who has been diagnosed with COVID-19
  • Experience adverse financial consequences as a result of being quarantined, furloughed, laid off, or having to work reduced hours because of the disease
  • Are unable to work because they lack childcare as a result of the disease
  • Own a business that has closed or been forced to operate under reduced hours because of the disease
  • Or meet other criteria that the IRS approves

These are the special rules in place for coronavirus-related distributions:

  • They are not subject to the usual 10% penalty for distributions made before age 59½.
  • They are not subject to mandatory tax withholding, which is normally 20%. 
  • There is a 3-year window in which you can replace any distributions that you take.  The 3 years begin the day after the distribution is made.
  • Any income taxes due on the distribution can be spread over a 3-year period or paid immediately, depending on what is most beneficial for the individual taxpayer.

How We Can Help

As you can see, the CARES Act stimulus bill opens up strategic opportunities for both those who do not need the money in their retirement accounts and those who have a need to tap into their accounts early.  To learn more about the new rules or how best to apply them to your unique situation, call us at (844) 377-4963 or email  You can also book a complimentary consultation online here.

Perritt Capital Management, Inc. is the Registered Investment Advisor for Windgate Wealth Management accounts and does not provide tax advice. Consult your professional tax advisor for questions concerning your personal tax or financial situation.

Data here is obtained from what are considered reliable sources.  We consider the data used to be relevant and reliable.

First published April 2020.

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