How the coronavirus stimulus package can help retirees and savers

The House gave final passage Friday to a massive $2.2 trillion stimulus package intended to help businesses and workers cope with the economic impacts of the coronavirus pandemic.

But goodies for Americans saving for retirement, and those already retired, are also tucked inside.

“The bill is complex, so check with a tax specialist or accountant before making any big moves,” said Mitch Gerstein, a CPA with Isdaner & Co. in Bala Cynwyd. “But the idea is to put money into people’s hands as fast as possible.”

Here’s what you need to know.

Usually, retirees must take out a minimum lump sum every year from their retirement accounts. It’s called the required minimum distribution (RMD), and you pay taxes on that money.

But this year, you don’t have to take your RMD under the stimulus law and can avoid paying taxes, too.

“Some people already took money out this year,” Gerstein said. “And, yes, you can put it back. There is a provision [in existing legislation] that you can take money out of an IRA and within 60 days, you can put it back in.”

The new legislation makes several changes to policy around retirement savings.

You can wait to contribute money to your retirement plan. On March 24, the IRS issued rules that extended the due date for IRA contributions and plan contributions to July 15 instead of April 15.

» READ MORE: What to know about the coronavirus stimulus checks — and how and when you get your money

In addition, the package waives the 10% tax for withdrawals for amounts up to $100,000 from all retirement plans and IRAs. You can take out the money as a loan, not paying any taxes, on one condition: Any amount you take out must be repaid in three years.

Who qualifies? According to the new law, anyone who experiences “adverse financial consequences” as a result of being quarantined, furloughed, laid off, or suffering reduced working hours, or who is unable to work due to lack of child care. That’s most of us.

In addition, the bill increases the dollar amount available for loans from retirement accounts from $50,000 to $100,000, according to a client note by the law firm Steptoe & Johnson.

So say you have a workplace 401(k). The CARES Act temporarily doubles the current retirement plan loan limits to $100,000 to allow individuals to borrow up to the lesser of $100,00 or 100% of their vested retirement account balance for loans made during the 180 day period starting on the date the CARES Act is enacted. The CARES ACT was enacted on March 27th .

The legislation encourages Americans to contribute to charity in 2020 by relaxing some of the limitations on charitable contributions: For instance, allowing a deduction of up to $300 of cash contributions, whether or not the taxpayer itemizes deductions on their taxes. Also, the new law scraps the 50% limit on charitable deductions for individuals.

The new legislation aggressively expands unemployment benefits to gig-economy workers adversely impacted by the coronavirus.

Gig-economy workers can receive the same unemployment benefits as any other laid-off employees under the law — including an additional $600 a week for up to four months — even if the employee is currently making less, and an additional 13 weeks of benefits for participating states.

If you’re self-employed, you don’t have to pay payroll taxes through the rest of the year. You have a year or more to pay it back, according to Gerstein.