How to Get Up to $100,000 From the Coronavirus Stimulus Bill
Most people are focusing on the direct cash payments from the $2 trillion coronavirus stimulus bill. However, it also includes provisions to have individuals can used their retirement accounts, such as a 401(k) or IRA.
In the past, if you wanted to withdrawal money from your 401(k) or IRA, you would be required to pay an early withdrawal fee of 10% and income tax on the distribution. Now, you are allowed to take a coronavirus-related hardship distribution of up to $100,000.
Individuals who qualify are people who are diagnosed with coronavirus, spouses or dependents who have coronavirus, or those experiencing financial consequences from quarantine, furlough, layoffs, or having their houses cut due to coronavirus. But the rules are loose and retirement plan sponsors are told to rely on employees’ word that they’ve eligible.
Therefore, this provision may be able to help your residents pay rent, help you or someone you know cover living expenses, or help you cover business expenses.
The up to $100,000 distribution is also tax free for 3 years, at which point the money must be replenished or an income tax will be incurred.
If you haven’t experienced a coronavirus-related hardship, you can still access up to $100,000 from your 401(k). In the past, the maximum loan amount you could take against your 401(k) was $50,000 or 50% of the vested amount, whichever is higher. With the coronavirus stimulus bill, the maximum amount has doubled to $100,000. The loan process is the same, which means you need to pay back the loan with interest or else it will be treated as a withdrawals which is subject to a fee and income taxes.
This loan can be used to cover rent, living expenses, or business expenses. Also, many investors use 401(k) loans to acquired investment property.
If you have a 401(k), IRA, or other retirement account and experienced a coronavirus-related hardship, you may be able to access up to $100,000 without paying an early withdrawal fee or paying taxes for up to three years. If you haven’t experienced a coronavirus-related hardship, you can still access up to $100,000 by taking a loan out against your 401(k) balance.