WASHINGTON, D.C. (WGNO) – Covid-19 is doing a number on the U.S. economy but, there is light at the end of the tunnel coming from the CARES ACT.
“People are really getting stressed out,” said Ernie Burn with Burns Estate Planning and Wealth Advisors.
The CARES ACT is designed to bail Americans out of this financial crisis.
“The cares act really promoted businesses not to release people basically the furloughing them until they get back to work when they could pay them in the meantime too,” explained Burns.
The biggest help from the CARES ACT is the option to take penalty-free withdrawals from a retirement savings plan.
“What the CARES ACT did, it allows you to make a one-time distribution of $100,000 if you are prior to 59,” said Burns. “We can draw out $100,000 and not have that 10% penalty held by the IRS.”
This relaxes the rules for retirement savers who need the cash. Originally, if you withdrew money from your retirement before a certain age, you were penalized. And now, there’s no penalty.
“That could really help people who were furloughed and have not been called back to work or who have lost their jobs all together to basically pay their current bills or needs,” shared Burns.
Another opportunity to consider is the Roth Conversion option.
“The Roth Conversion gives a benefit if you are currently near retirement or you have a retirement account or IRA, you’re able to roll that IRA into a Roth and you would pay taxes on it initially but now you’re paying taxes at a discounted rate. Because the market is lower.”
Reporter Peyton LoCicero asks, “Should we take advantage of this everything being offered or should we say I’m going to wait this out?”
“Overall yes, you should take advantage of it because it gives you the ability to keep more people employed and this nation needs it,” answered Burns.
To avoid this from happening in the future, Burns recommends setting up an emergency funds account just in case.