A Guide To The Retirement-Related Provisions In The Senate Coronavirus Stimulus/Relief Bill

[question everything]

(snip)

For savers - section 2202

Individuals affected by the coronavirus will be permitted to take a withdrawal from their retirement accounts (IRAs, 401(k)s, etc.) of up to $100,000, without paying the usual early-withdrawal penalty. In addition, the sum withdrawn may be recontributed to a retirement account within three years, without being subject to the usual annual contribution caps. If it’s not repaid, the withdrawal will be taxed at ordinary income tax rates over a three-year period. Notably, the definition of eligibility for penalty free early withdrawals is rather expansive, encompassing anyone experiencing any economic effects due to the virus.

In addition, the limit on loans from retirement plans is increased from its existing $50,000 to $100,000 and the existing limitation that loans may not exceed half the vested account balance has been removed. Due dates for new loans or loans already outstanding are also to be extended by one year.

For retirees - section 2203

The legislation waives the required minimum distributions for IRAs and other individual retirement accounts for calendar year 2020.

More..

https://www.forbes.com/sites/ebauer/2020/03/26/a-guide-to-the-retirement-related-provisions-in-the-senate-coronavirus-stimulusrelief-bill/#6db5cfb373bb

(More details about pension plans that I don't understand but am happy about the RMD suspensions that I have griped here several times.)

[progree]

1. Good, I was projected to take a $12,800 RMD this year on my inherited IRA, but now I have that much

more that I can convert to Roth without hitting another tax bracket or having to pay a Medicare premium surcharge 2 years later.

By the way, probably a wonderful time to do a Roth conversion, since with stock prices low, for a given amount of dollars that one has to pay taxes on, one gets to convert more shares.

E.g. if I'm targeting a $20,000 Roth conversion:

# In a good market, if share price is $20, then I convert 1,000 shares from Traditional IRA to Roth

# In a bad market, if share price is $10, then I convert 2,000 shares from Traditional IRA to Roth

In the bad market example above, one converts twice as many shares for the same tax hit: $20,000 X one's effective marginal tax rate

The legislation waives the required minimum distributions for IRAs and other individual retirement accounts for calendar year 2020.

Another tax tip: to look at stuff in regular taxable accounts that one has been reluctant to sell because of capital gains taxes, but otherwise would like to get rid of. Well, now in the bad market, the capital gain will be less or maybe zero or a capital loss ... I did that in 2008-2009.

Not that the market is that much down -- S&P 500 closed Friday, down 25% from February's all time high and above the levels of 3 years ago, but something to watch as coronavirus cases in U.S. keep 10-folding every 8 or 9 days.
https://www.democraticunderground.com/10142457946#post16

[question everything]

2. Excellent suggestion and was mentioned by a reporter

I think that we will withdraw the original amount - my spreadsheet already includes it - but a part will go to Roth conversion. We still need the RMD just not all of it. Now even less as we just sit at home. ..