A “Just In Case” For Those Struggling Financially Due to COVID-19

It would be difficult to find a business or individual in the world that hasn’t been impacted by COVID-19 in some way. Millions of people are either unemployed, struggling to keep their businesses open, or are just trying to maintain the minimum cash flow necessary to provide the essentials needed to live. While unemployment assistance is available and stimulus payments continue to go out, much of the assistance has been slow, or has yet to arrive. Many people are exhausting their savings, if they haven’t already, and are looking for any possible way to survive financially. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. It included qualified retirement plan distribution relief that may be an option to help you get through this global pandemic.


Prior to COVID-19, the IRS did allow taxpayers to take retirement distributions early, however doing so would result in a 10% additional tax if you were under age 59 1/2. Considering the economic hardship that most Americans are currently facing, the IRS has provided some much-needed relief to individuals that are adversely affected by this pandemic.

Relief Breakdown

As part of the CARES Act, the 10% early withdrawal penalty is being waived. This applies to coronavirus-related retirement distributions up to an aggregate total of $100,000 from all eligible plans and IRAs to a “qualified individual”.  This waiver will apply to all retirement distributions that qualify under the CARES Act between January 1, 2020 and December 31, 2020, even if you are under 59 ½. This waiver applies to eligible retirement plans such as:

  • Traditional individual retirement accounts (IRAs)
  • 401(k) plans
  • Profit-sharing plans
  • Stock bonus plans
  • Qualified 403(a) annuity plans
  • 403(a) annuity contracts
  • Custodial accounts
  • Governmental section 457 deferred compensation plans

In addition to the 10% waiver, taxpayers can pay the tax associated with the distribution over a three-year period beginning with tax year 2020. Depending on the plan, taxpayers may also recontribute the funds they withdrew in one or more payments over a three-year period.


To be considered a “qualified individual” for this relief, you must have experienced at least one of the following;

  • Either you, your spouse, or one of your dependents was diagnosed with COVID-19
  • You have experienced financial hardship because you have been quarantined, furloughed, laid off, or had hours reduced due to the pandemic
  • You are unable to work due to child care responsibilities
  • You own or operate a business and had to close or reduce hours due to the pandemic
  • You have experienced an adverse financial consequence due to other factors as provided in guidance issued by the IRS

Withdrawing funds from a qualified retirement plan early should never be a first choice, but under certain circumstances it may be necessary. It’s nice to have the option available without having to take the 10% early withdrawal penalty, while also having the option to pay income taxes on the distribution over a three-year period.

Further Information

If you have any questions regarding the qualified retirement plan distribution relief available though the CARES Act, please reach out via email, give us a call at (401) 921-2000, or fill out our online contact us form. For further information regarding COVID-19 assistance programs, please visit our COVID-19 Resources page.