A4. Sign up here. Email him at AskPete@petetheplanner.com. Save better, spend better: Get money advice like this delivered right to your inbox. Unfortunately, our website is currently unavailable in your area. If you’ve lost your job but you’re still in your old employer’s 401(k) … The maximum unemployment benefit in Texas is $521 per week and you will also receive the $600/week enhancement made possible through the CARES Act. Read or Share this story: https://www.usatoday.com/story/money/2020/05/03/coronavirus-draining-401-k-wont-end-your-financial-life/3048762001/, Get money advice like this delivered right to your inbox. This is particularly important if you’re considering 401k withdrawals during coronavirus. But obviously, it didn't come soon enough for some of the bill collectors figuratively beating down your door. The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY. Requested URL: www.thepennyhoarder.com/retirement/using-401k-for-coronavirus/, User-Agent: Mozilla/5.0 (Windows NT 6.3; Win64; x64) AppleWebKit/537.36 (KHTML, like Gecko) Chrome/83.0.4103.116 Safari/537.36. It will just go differently than you thought it would. Do I have to pay the 10% additional tax on a coronavirus-related distribution from my retirement plan or IRA? Fortunately, all three of these factors are related to each other and are complementary to each other in the form of employer-sponsored retirement plans and/or IRAs. Download The CBS News App The IRS released guidance on Friday which details new rules for individuals affected by Covid-19 to take a withdrawal from a 401 (k) plan or an individual retirement account. The coronavirus stimulus package waives 401k early withdrawal penalties, making it easier for Americans to access trillions of dollars in retirement accounts to stimulate the economy. All this is to say, help is on the way. I haven’t received unemployment yet, nor has my wife. While the CARES Act allows you to withdrawal up to $100,000 penalty free from your 401(k), you are still responsible for paying taxes on the money over the next three years. Qualified individuals affected by COVID-19 may be able to withdraw up to $100,000 from their eligible retirement plans, including IRAs, between January 1 and December 30, 2020. Either way, she should still be covered by the federal benefit of $600/week. Once some of the shock and trauma of the moment wears off, I think you’ll see your financial life is not permanently ruined. Retirement planners say only do this if necessary. That’s why you made the bold decision to withdraw $75,000 from your 401(k). Withdrawing from an IRA: Should I withdraw money from my 401(k)? A link has been posted to your Facebook feed. Anyone can take up to $100,000 from their account — through a loan […] He has a free podcast: "Million Dollar Plan." The COVID-19 relief bill waives the standard 10% penalty for early retirement plan withdrawals and doubles the maximum allowable loan amount. Do an IRA Rollover if Necessary. Ideally, if you’re able to find work again in the next few weeks, you can put the remaining money back into an IRA to lessen your tax burden. 2020 is a year that most of us will never forget. We were already behind on some bills, and then our paychecks went away. The new rules to take a withdrawal from your retirement will apply to you, if: You have been diagnosed with SARS-CoV-2 (also called COVID-19) by a CDC approved test. These coronavirus-related distributions aren't subject to the 10% additional tax that generally applies to distributions made before reaching age 59 and a half, but they are still subject to regular tax. It will just go differently than you assumed they would have to pay the 10 % for. 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