The CARES Act or the Coronavirus Aid Relief and Economic Security Act gave some significant benefits to retirement savers in 2020. However, the disappearance of these in 2021 means you may need to consider alternative planning options. The first major change has to do with required minimum distributions. In 2020, the CARES Act enabled savers to skip required minimum distributions. However, these will need to be restarted in 2021. The second change relates to retirement plan withdrawals.
Under the CARES Act individuals younger than age 59 and a half are eligible to remove up to $100,000 from their retirement accounts without being subjected to the typical 10% penalty. The early withdrawal penalty, however, is back in effect in 2021 so don’t make any sudden changes or removals to your retirement plan anticipating that you may be able to leverage this now expired benefit.
The third issue relates to retirement plan loans. Savers with particular 401(k) plans were eligible to borrow as much as $100,000 from their accounts and to defer payments on those loans for a year. Although that change has been expanded into 2021, you’ll need to be with your financial professional to determine if you meet the qualified disaster requirements to do so.
The amount you are eligible to contribute to retirement plans in 2021 hasn’t changed. IRA investors can set aside up to $6,000 and those who are older than age 50 can set aside another $1,000 for a total annual contribution of $7,000. For more information about how this might affect your estate plan, set up a consultation with a lawyer in Virginia Beach.