How to handle your retirement accounts

The volatility of the markets continues to wreak havoc on retirement accounts. One day they’re up, the next day they’re down – but with more down than up – all courtesy of the coronavirus. One provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act suspends required minimum contributions, so people who suffered large losses have the opportunity to regain value in their requirement accounts.

In addition, the age to start taking Required Minimum Distributions (RMDs) is now 72. Prior to 2020, the age had been 70½.) The waiver also applies to inherited IRAs.

Because the deadline for filing your federal income tax return has been extended to July 15, the deadline for contributing to your IRA has also been extended. However, the deadline to make contributions for 2019, normally April 15, was not changed and has already passed.

The bottom line: Leave your retirement income alone if you can. Right now, your losses are all on paper until you execute a transaction.

However, for those younger than 59½ , the 10% early withdrawal penalty for tapping into defined contribution plans, such as a 401(k), is being waived, provided that you are experiencing coronavirus-related financial hardship, such as a job loss or COVID-19 illness itself. The waiver applies to withdrawals of up to $100,000 since January 1.

Income taxes aren’t waived, but you have three years to pay them, as well as three years to pay the plan back. Also, the limit on loans from retirement accounts has been doubled to $100,000, from $50,000, and payments on both new and existing loans can be deferred for a year.

Continue to make contributions to your retirement account if you can. AARP advises that a big factor in how much your retirement plan is worth is how much you contribute to it over time. By continuing to invest after prices have fallen, you are essentially buying investments when they are on sale (it’s the buy-low half of the “buy low, sell high” adage). In addition, if you have a 401(k) retirement plan and your employer matches some of your contribution, you’re getting free money.

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