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FINA N CI AL FOCU S CARES Act Offers Help for Investors, Small Businesses April 1, 2020 As we go through the coronavirus who qualify for COVID-19 relief and/or crisis, we are all, first and foremost, in plans that allow COVID-19 distribu- concerned about the health of our loved tions. Withdrawals will still be taxable, ones and communities. But the econom- but the taxes can be spread out over ic implications of the virus have also three years. Still, you might want to weighed heavily on our minds. However, avoid taking early withdrawals, as if you’re an investor or a business owner, you’ll want to keep your retirement you just got some help from Washington accounts intact as long as possible. – and it could make a big difference, at • Suspension of required withdrawals – least in the short term, for your financial Once you turn 72, you’ll be required to future. take withdrawals from your traditional Specifically, the passage of the $2 IRA and 401(k). The CARES Act waives trillion Coronavirus Aid, Relief and these required minimum distributions Economic Security (CARES) Act offers, for 2020. If you’re in this age group, among other provisions, the following: but you don’t need the money, you can let your retirement accounts continue • Expanded unemployment benefits – growing on a tax-deferred basis. The CARES Act provides $250 billion for extended unemployment insur- • Increase of retirement plan loan ance, expands eligibility and provides limit – Retirement plan investors who workers with an additional $600 per qualify for COVID-19 relief can now week for four months, in addition to borrow up to $100,000 from their what state programs pay. The pack- accounts, up from $50,000, provided age will also cover the self-employed, their plan allows loans. We recommend independent contractors and “gig that you explore other options, such as economy” workers. Obviously, if your the direct payments, to bridge the gap employment has been affected, these on current expenses and if you choose benefits can be a lifeline. Furthermore, to take a plan loan work with your the benefits could help you avoid liq- financial adviser to develop strategies uidating some long-term investments to pay back these funds over time to you’ve earmarked for retirement just to reduce any long-term impact to your meet your daily cash flow needs. retirement goals. • Direct payments – Individuals will • Small-business loans – The CARES receive a one-time payment of up to Act provides $349 billion to help small $1,200; this amount is reduced for businesses – those with fewer than incomes over $75,000 and eliminated 500 employees – retain workers and altogether at $99,000. Joint filers will avoid closing up shop. A significant receive up to $2,400, which will be re- part of this small business relief is the duced for incomes over $150,000 and Paycheck Protection Program. This eliminated at $198,000 for joint filers initiative provides federally guaranteed with no children. Plus, taxpayers with loans to small businesses who maintain children will receive an extra $500 for payroll during this emergency. Sig- each dependent child under the age of nificantly, these loans may be forgiven 17. If you don’t need this money for an if borrowers use the loans for payroll immediate need, you might consider and other essential business expenses putting it into a low-risk, liquid account (such as mortgage interest, rent and as part of an emergency fund. utilities) and maintain their payroll during the crisis. • No penalty on early withdrawals – Typically, you’d have to pay a 10% We’ll be in a challenging economic en- penalty on early withdrawals from vironment for some time, but the CARES IRAs, 401(k)s and similar retirement Act should give us a positive jolt – and accounts. Under the CARES Act, this brighten our outlook. penalty will be waived for individuals This article was written by Edward Jones for use by your local Edward Jones Financial Advisor. Katrina M Johnson, AAMS® Financial Advisor edwardjones.com 1141 South State St., Suite 23 Member SIPC Davison, MI 48423 810-653-6307
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