By Kate Stalter, U.S. News & World Report, via Yahoo News
The COVID-19 crisis is shining a spotlight on employer-sponsored retirement accounts such as 401(k)s. Long-standing rules have been relaxed, and investors have new options for making withdrawals.
These changes were put into law last month as part of the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act.
Financial advisors are also being more proactive in helping clients with these employer-sponsored vehicles, which are usually held outside the investment accounts an advisor manages.
For starters, 401(k) account owners can now access up to $100,000 penalty free if they, a spouse or dependent suffer adverse consequences — either health or economic — due to the virus.
Also, 401(k) loan limits have been raised. “Before this crisis, loans were limited to the lesser of $50,000 or half of the vested balance in the participant’s account,” says Allison Brecher, general counsel at Vestwell, a New York-based retirement plan administrator.
“The CARES Act increased that to the lesser of $100,000 or the full present value of the participant’s vested account balance. Loans, even from a participant’s own retirement plan account, do need to be repaid, but the repayments (on outstanding loans) can be delayed by up to one year,” she says.