Pub. 10 2020 Issue 2

19 PUB. 10 2020 ISSUE 2 movements in stock prices often occur following steep market declines. Control what you can Over the long term, your actions — not the market — have the most significant impact on whether you reach your retirement goals. Maximizing your deferral contributions has the largest single effect on your retirement outcome. Just as important, stick to your long-term strategy. Remember that when the markets decline, your retirement plan contributions buy more shares for the same dollar amount invested. While it can be challenging to control your emotions during stressful times of market volatility, it is best to resist the urge to deviate from your long- term plan by prematurely selling invest - ments at what could be market lows. Know what options you have under your retirement plan Your retirement plan is a vehicle for you to save for the future, but sometimes life gets in the way. You may find yourself strug- gling financially with day-to-day expenses as a result of this pandemic, and the money you’ve already saved in your retirement plan may help you through this emergency. It’s important to know what your options are under your plan, as well as their impact on your financial and tax situation. Your retirement plan may allow for distri- butions if you experience certain hardships, such as unreimbursed medical expenses, or to prevent certain hardships, such as eviction or foreclosure. This distribution is limited to only what you need, and it is in - cluded in your taxable income for the year. You may be able to take a loan against your 401(k) account. You pay yourself back via loan payments withheld out of your paycheck. These loans are not subject to federal or state income tax unless you default on the loan, and they usually must be paid back within five years. How the CARES Act may affect your retirement plan The Coronavirus Aid, Relief, and Econom- ic Security Act (CARES Act) was passed March 27, 2020, providing financial aid for individuals and businesses in response to the COVID-19 pandemic. If you, your spouse or dependent have been diagnosed with COVID-19, or if you have suffered adverse financial consequences as a result of a quarantine, furlough, layoff, reduction in work hours, business closure, or the lack of child care, the CARES Act may pro- vide some relief. Each retirement plan is different, so the options available to you will depend on the terms of your plan. The CARES Act allows plans to add a distribution option up to $100,000 for qualified participants. This distribution is not subject to the 10% early withdrawal penalty, but it is still subject to federal and state income tax. If you have an outstanding loan from your 401(k) account, the CARES Act also allows plans to suspend outstanding loan payments for up to a year for participants who qualify and request the suspension. The loan would be re-amortized and interest would still accrue, but you would have additional time to repay the loan. Keep in mind, if you have an outstanding retirement plan loan and your employment ends (voluntarily or involuntarily), your loan may default and be considered taxable income. The CARES Act also waived required mini- mum distributions for 2020. Each retirement plan is different, but if you find yourself struggling with a financial emergency, you may want to discuss your options with your retirement plan admin - istrator. Remember, any money you take out of your 401(k) plan now to cover an emergency is money that’s not invested and set aside for your retirement. If you are in a position to leave your retirement plan un - touched, continue focusing on the long-term and control what you can. w D’Angelo Johnson is Vice President, Private Bank- ing Manager at Bankers Trust. He has 16 years of banking and financial services experience. He can be reached at DJohnson@BankersTrust.com You may be able to take a loan against your 401(k) account. You pay yourself back via loan payments withheld out of your paycheck. These loans are not subject to federal or state income tax unless you default on the loan, and they usually must be paid back within five years.