CARES Act: Coronavirus-Related Retirement Distributions

by Financial Design Studio, Inc. / March 31, 2020

CARES Act: Coronavirus-Related Retirement Distributions


You can take up to $100,000 out of your employer retirement plan (401k, 457, etc) or IRAs without incurring the normal 10% withdrawal penalty.


The CARES Act- Coronavirus-Related Retirement Distributions fee only financial advisor deer park chicago barrington draftNormally, when you take money out of your 401k or IRA before Age 59-½, you’d have to pay a 10% penalty in addition to income taxes on the amount taken out.

The CARES Act does away with the 10% penalty for any distributions up to $100,000.

Amount & Timing:

You can take out up to $100,000 from your retirement accounts between January 1, 2020 and December 31, 2020.


  • Access money in an emergency up to $100,000 without incurring a 10% withdrawal penalty, assuming you’re under the age of 59-½.
  • No federal tax withholding on distributions from employer plans will be taken out of the distribution.

How do I qualify for a distribution?

You must “self certify” the need to take a distribution, which means you just have to tell them that you have a need to take a distribution for a virus-related reason. The reasons to take a distribution include:

  • You, your spouse, or a dependent are diagnosed with COVID-19
  • You’ve experienced adverse financial consequences due to being quarantined, laid off, or having work hours reduced as a result of COVID-19
  • You’re unable to work due to lack of childcare resulting from school closures, etc
  • You own a business that has been negatively impacted financially due to the virus

Your employer cannot hold distributions back and/or verify whether your reason is good enough or not. But please be aware that the IRS can always come back at a later date and ask to verify that you had a real reason to take the distribution. 

Can I put the money back if I don’t need it?

YES. You have up to 3 years from the date of the distribution to return the money to your account.

Do I still have to pay income tax on the distribution?

YES, but there’s flexibility. If you take a distribution and don’t intend on putting the money back into the account, you’d still owe income tax. However, you have two options to pay this tax:

  1. Pay the tax on the entire distribution in Tax Year 2020 -OR-
  2. Pay the tax on the entire distribution spread out over 3 years, Tax Years 2020, 2021, and 2022

Interested in the other areas of the CARES Act? We are breaking down these details by section in the following resource. You can click to the particular section you’re interested in directly below if you’d like to read the specifics of those first.  We do encourage you to look through all of the sections that could potentially impact you since this is a very generous bill aimed at keeping our country’s economy strong during and after this pandemic.

Financial Design Studio CARES Act Summary

Like any benefit that becomes available to you it is critical to see if it makes sense to use the provisions allowed.  While a benefit might make your temporary financial situation better, it might not be beneficial in the long term. However, those who need these provisions were created for are likely in immediate need to use the benefits until employment returns to normal.


Recovery Rebates

Coronavirus-Related Retirement Distributions 

Enhanced loans from employer retirement plans

Required Minimum Distributions waived for 2020 

Qualified Charitable Contributions – NEW Above the line deduction 

AGI Limit for Cash Charitable Contributions Limit Temporary Repealed

Student Loan Borrower Relief

Miscellaneous Healthcare Benefits

Unemployment Benefits

Mortgage Forbearance Request


Business Owners:

Paycheck Protection Program & Forgivable Loans

Employee Retention Credit

Payroll Tax Payment Deferral 

Net Operating Losses Loosened

Wondering how this affects your future finances? Schedule a call with Financial Design Studio, financial advisors in Deer Park, to discuss your portfolio today.

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Financial Design Studio, Inc.

We are financial advisors in Deer Park and Barrington, IL. A team with a passion for helping others design a path to financial success — whatever success means for you. Each of our unique insights fit together to create broad expertise, complete roadmaps, and creative solutions. We have seen the power of having a financial plan, and adjusting that plan to life. The result? Freedom from worrying about the future so you can enjoy today.