The CARES ACT Allows You To Borrow From Your 401K -- Good idea? Or Bad?
Borrowing From Retirement Plans
The plan allows people to take special disbursements and loans from tax-advantaged retirement funds of up to $100,000 without facing a tax penalty. It waives the required minimum distribution (RMD) rules for 401(k) plans and individual retirement accounts (IRAs) and the 10% penalty on early withdrawals up to $100,000 from 401(k)s. Account holders would be able to repay the distributions over the next three years and be allowed to make extra contributions for this purpose. These measures apply to anyone directly affected by the disease itself or who faces economic hardship as a result of the pandemic.
For taxpayers, it allows an above-the-line deduction from adjusted gross income of up to $300 for charitable contributions and relaxes other limits on charitable contributions.
If you are tempted to do this but aren't sure whether this is a good idea given your circumstances, please let me know if you would like a free consultation. Here is the link to my free consultation during Financial Literacy Month: