The majority of Americans are getting affected by the coronavirus pandemic, both in terms of physical and financial health. While so many businesses are closing down to contain the virus spread, over 6.65 million people have filed for unemployment benefits in the last few weeks.
You might fear that the apparent future economic downturn would affect your retirement savings. But hold on a little, as regulations of the COVID-19 stimulus bill can indeed help your retirement savings plans.
You must already know that the Coronavirus Aid, Relief, and Economic Security (CARES) Act has declared the help of $2 trillion. Not to mention, millions of U.S. citizens will be receiving a $1,200 stimulus check. Below are three ways you can benefit your financial health owing to the new regulations.
1 – The new SECURE Act passed last December requires you to start taking RMDs after turning 72. Earlier the age limit was 70½. So normally, if you had to make withdrawals in 2020, then you can avoid that owing to the new rule. If you were to sell your investments during the market downturn, then it would mean more loss to you. But now, you can let your savings sit alone and recover until the next year when market conditions will get better. So, next year your investments will be worth more.
2 – While it’s true that the new stimulus rule will benefit those who are in their 70s, you still need not to lose hope if you are a young worker. Earlier, if you were to make withdrawals before turning 59½, then it was necessary to pay a 10% penalty along with income taxes. But the new stimulus allows you to withdraw up to $100,000 for coronavirus related expenses with zero penalties. Yes, you will need to pay taxes, but it will get spread over three years.
3 – Another significant benefit of the new regulations is that you can borrow more from your 401(k)s and have a longer time to make the repayment. Usually, you can borrow up to 50% of your vested account balance, but now the limit has gone up to 100%. You can borrow up to $100,000 and have an extra year to repay the loan.
Those were some of the ways you can support your retirement savings, thanks to the new COVID-19 stimulus bill.