08 Sep Can my wife and I both take from our 401(k)s under the CARES Act?

Q. I’m married and file my taxes jointly. Am I allowed to take a withdrawal from my retirement plan and have my spouse also take a withdrawal from her retirement plan — two withdrawals from the same family — to help because of the coronavirus. We’re thinking of the withdrawals because of reductions in pay and not having child care.
— In trouble

A. Provisions from the CARES Act will give you the break you’re looking for.

You and your spouse can take up to $100,000 from your retirement accounts as a COVID-19 distribution if the rationale is coronavirus-related, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.

She said you can access the withdrawals without incurring the 10% early withdrawal penalty.

You can also spread the tax liability over three years or repay the money and avoid the taxes over the same time frame.

“The eligibility includes those who were personally infected or had a spouse or dependent infected with the virus but has expanded to include those who were laid off, furloughed or had hours reduced or were unable to work due to childcare issues, or business owners that had to close their business,” she said. “It also includes individuals who had a start date for a job delayed or lost an offer.”

D’Agostini said a spouse, even if still employed, can also take advantage of the COVID-related distribution.

“If you suffered adverse financial consequences due to being quarantined, furloughed, being laid off, having reduced work hours or lack of child care, then you qualify,” she said. “If you can certify a reason that is covered above, then you should qualify.”

You can learn more by reading Section 2022 of the CARES Act. 

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This story was originally published on Sept. 8, 2020.

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