After 21 years of working for the same company, I quit in late Feb. of this yr. (2020). And then COVID hit. Due to COVID wrecking the economy, I have been unable to find work for approx. 8 months. I am 40-years-old and unable to receive Unemployment Compensation Benefits. My question is this - Am I able to withdrawal money from my 401(K) account WITHOUT incurring a 10% penalty? I have read mixed answers. Many thanks!
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Yes, you can withdraw from a 401(k) account without penalty if you have been affected by the Coronavirus.
Go to this IRS website for Coronavirus-related relief Q&A's - https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-...
I think you are wrong about that. I need an expert to chime in here, please. I thought I could only withdrawal money w/o penalty, if I was laid-off or furloughed. Neither of those apply to me.
@1QuickQuestion wrote:
I think you are wrong about that. I need an expert to chime in here, please. I thought I could only withdrawal money w/o penalty, if I was laid-off or furloughed. Neither of those apply to me.
From the IRS website - https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-...
You are a qualified individual if any of these situations apply to you:
If none of those situations apply in your circumstances then you are not a qualified individual and the CARES act does not apply to you.
An early withdrawal from a 401(k) will incur a 10% penalty on your 2020 federal tax return.
Also see this IRS Notice 2020-50 - Guidance for Coronavirus-Related Distributions and Loans from
Retirement Plans Under the CARES Act - https://www.irs.gov/pub/irs-drop/n-20-50.pdf
The fiduciary of my 401K told me that because of COVID and the CARES Act, the penalty could be delayed for up to 3 years. I work in a hospital, so if I leave it would be voluntary because we are open and very busy.
You must have read the reply by @DoninGA and realize that you would not be eligible unless you or a family member had COVID as the rest of the possibilities do not apply to you.
From How are my taxes affected by COVID?:
If you needed to take money out of your retirement plan, keep in mind that the 10% early withdrawal penalty may be waived on up to $100,000 of retirement funds withdrawn if you are a qualified individual impacted by coronavirus.
Additionally, income attributable to such distributions would be subject to tax over three years, and you may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions.
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