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CARES Act: Retirement Provisions and What They Can Mean to You

| May 06, 2020
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In response to the economic fallout of the COVID-19 pandemic, the CARES Act contains a number of essential measures important to the financial security of the American population. This far-reaching legislation offers protection and support to small businesses, hospitals, and individuals, such as more flexibility with your retirement accounts. Here, we’ll discuss some of the changes and the impact they may bring to your retirement income strategies:

  1. Required Minimum Distributions (RMDs) are suspended for 2020. These include 401(k)s, 403(b)s, 457(b) plans, and IRAs. This gives retirees the opportunity to leave their investment portfolios alone for another year to recover losses incurred during the volatile markets. Those that have already taken their RMD for 2020, the CARES Act doesn’t allow for repayment of the RMD back to their retirement plan. However, there’s a 60-day grace period which allows RMDs to be rolled over into a new IRA.1
  2. Roth IRA conversions during this time could result in substantial tax savings while markets are down, and tax rates are lower. Since the bill allows you to skip RMDs for 2020, you can convert assets from a traditional IRA to a Roth IRA without having to satisfy the typically required RMD.2
  3. Cash contributions to qualified charities are fully deductible up to 100% of a taxpayer’s adjusted gross income (up from 60% previously). Taxpayers who don’t itemize their deductions are entitled to a “above-the-line” deduction of up to $300 for qualified charitable contributions.3 

As we continue to navigate through this challenging environment, we strive to provide you with immediate clarity to help you make fully informed decisions. If you have any questions regarding the provisions above or would like to talk through more of what could have an impact on your financial future, connect with us. Our team of experts are here to help you thrive in the face of uncertainty, today and tomorrow.

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This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results.  Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.

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[1] https://www.aarp.org/money/taxes/info-2020/ed-slott-more-rmd-answers.html
[2] https://www.marketwatch.com/story/covid-19-crisis-creates-a-perfect-opportunity-for-roth-ira-conversions-2020-04-15
[3] https://www.kiplinger.com/article/retirement/T037-C032-S014-why-retirees-should-care-about-the-cares-act.html

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