COVID-19 CARES Act waives penalty for early retirement distributions
Business Insider reported recently that the CARES Act enables people to take early retirement distributions without paying the usual 10% penalty. My local CPA confirmed the President signed this into law at the end of March.
The relief bill waives penalties on up to $100,000 of retirement plan distributions. There’s a provision in the relief bill that allows investors to take penalty-free distributions from IRAs and qualified retirement plans, like a workplace 401(k), up to $100,000. Usually any non-qualified early withdrawal — money taken out before you turn 59.5, except in the event of death or disability — is subject to a penalty equal to 10% of the distribution amount. The relief bill waives that penalty. The no-penalty allowance applies to “coronavirus-related distributions” — i.e. people who are diagnosed with COVID-19 or have experienced financial hardship from quarantine, layoffs, reduced hours, or furlough between now and December 31, 2020. It also includes people who are unable to work due to lack of childcare or business owners who can’t operate right now.