Because of the negative impact of the COVID-19 crisis on America, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law to provide emergency relief to individuals and businesses.As a result of the act, changes have been made to several retirement plan provisions.10% Early Withdrawal PenaltyTypically, when money is withdrawn from a qualified retirement plan before age 59 1/2, a 10% early distribution penalty is assessed. If allowed by the plan, the 10% penalty that would normally be assessed on early withdrawals from a retirement plan may be waived for distributions up to $100,000 for certain situations encountered due to the COVID-19 crisis.Penalty-free withdrawals may be made by individuals during the 2020 calendar year if he or she, his or her spouse and/or dependent have been diagnosed with COVID-19 and/or has suffered financial losses due to reduced work hours, loss of employment, etc.Loan LimitsA qualified retirement plan may, but is not required to, provide loans to plan owners. If loans are made, there are limits to loan amounts.Since the COVID-19 crisis began, limits on amounts that can be borrowed from employer-sponsored plans and deadlines for repayment have been expanded.The maximum loan amount has increased to $100,000 or 100% of the plan participant’s vested account balance, whichever is less. This applies to loans made on or before Sept. 23, 2020, and may be made by an individual if he or she and/or his or her spouse or other dependents have been diagnosed with COVD-19 and/or has suffered financial losses due to reduced work hours, loss of employment, etc.Loan repayments may be delayed for up to one year, but interest continues to accrue during this time. The retirement plan may also extend loan terms for up to one year. If loans are not repaid, the distribution will be taxable.Required Minimum Distributions (RMDs)Normally, when a person reaches a certain age, he or she is required to begin taking RMDs from their employer-sponsored retirement accounts and their individual retirement accounts (IRAs) the year following reaching that age.The CARES Act has suspended RMDs from employer-sponsored retirement plans and IRAs for calendar year 2020. If RMDs already have been made, plan participants can roll the money back into the plan or roll it over to another plan without any tax consequences.There are overall rules that govern various types of retirement plans. However, retirement plans can differ from one employer and/or sponsor to the next.Be sure to check with your retirement plan sponsor and/or financial advisor before making a decision about withdrawals or loans from your retirement plans.
A new study commissioned by The Salvation Army has found one in three mortgage holders will struggle to meet repayments if interest rates rise this year.The survey of more than 1000 people also found 60 per cent believe they will either live “a basic lifestyle” or “struggle to get by financially” in retirement. One in four of us are worried about “won’t have enough reasonably paid work” or a “job at all” this year. Nearly half of those surveyed were more worried about their financial situation compared to last year and 41 per cent said their financial situation was affecting their “emotional wellbeing”, “family life”, “career goals” or “social life”. The Reserve Bank of Australia is expected to raise interest rates this year. Photo: AFP/William West.The majority of economists expect interest rates to remain on hold until at least the second half of this year.This week, National Australia Bank joined ANZ in abandoning its view that the Reserve Bank of Australia will hike interest rates twice this year, with the bank’s economists now expecting a single rate rise in November.The official cash rate has remained on hold at a record low 1.5 per cent since September, 2016. One in three mortgage holders will struggle with repayments if interest rates rise this year, new research reveals. Photo: Glenn Hunt/Getty Images.ONE in three people with a mortgage will struggle to meet repayments if interest rates rise as expected this year, new research reveals.The study commissioned by The Salvation Army and conducted by Roy Morgan also found more than half of us (9.9 million) believe the great Australian dream of owning a home is over. GET THE LATEST REAL ESTATE NEWS DIRECT TO YOUR INBOX HERE Salvation Army Major Paul Moulds. Picture: Supplied.The Salvation Army officer Major Paul Moulds said the housing affordability crisis was having a catastrophic effect on those presenting to the Salvos for help. “Two-thirds of people accessing our emergency relief services are living under extreme housing stress,” he said. “With more than half of their income going towards housing, many Australians simply can’t afford to save money. “A lack of job security is also complicating people’s financial stability, pushing them further to the margins.” ‘FLOATING HOUSE’ SET FOR AUCTION PERFECT FAMILY ESCAPE SPACE AND COMFORT More from newsParks and wildlife the new lust-haves post coronavirus20 hours agoNoosa’s best beachfront penthouse is about to hit the market20 hours ago A new study has found one in three mortgage holders will struggle to meet repayments if interest rates rise this year. Picture: AAP/Troy Snook.Major Moulds said people needed to be more open about their financial problems before they escalated.“We need to remove the stigma around asking for help,” he said. “We are urging people to take preventive steps to avoid hardship in the future. “It’s clear that many Australians are not having an honest conversation about their situation, and are waiting till they are in crisis before taking action.”