The CARES Act and access to your retirement funds

Monday’s post, about investing your retirement savings in your community rather than Wall Street, mentioned the ability to borrow from your 401(k), 403(b), SEP, SIMPLE, ESOP, or other qualified retirement plan.

I’d like to clarify that you can take such a loan even if you have not taken the plunge into the self-directed retirement pool.

On March 27, the CARES Act temporarily increased the amount you are able to borrow. Ordinarily, you may borrow the lesser of $50,000 or 50% of the vested account balance. The CARES Act increases those limits to $100,000 or 100% of the vested, until September 23, 2020.

You may need the funds for yourself, and it is also possible to lend your wealth to others who need it. Next month, The Next Egg is hosting a webinar on borrowing from your existing qualified plan for community investment. Tuesday, July 17, 12-12:30 EDT.

The CARES Act also waives the ordinary 20% tax withholding imposed on such disbursements. Your plan may also offer a year’s deferral on repayments. Check with your employer or plan administrator for details—employers and administrators may choose not to offer these benefits.

The CARES Act also offers some relief if you need to take a distribution from a plan (for instance, IRAs do not allow borrowing). Any early distribution you make in 2020 will be exempt from the 10% penalty for early withdrawal.

Further, you have options for handling the regular taxation of these disbursements from your traditional IRA. You may choose to allocate the income for taxation across three tax years (and this options is available even if you are not taking early withdrawals). Additionally, you may choose to repay the disbursement within the same timeframe (so, by the end of 2022). Continue reading “The CARES Act and access to your retirement funds”

Investing Your Retirement Savings in Your Community

One of the factors that influenced my decision to return to the US from Canada was the damage it was clear that covid-19 was going to inflict on small businesses and local economies. That’s always been my business niche, and it was wrenching to hear stories of how my friends and past clients were suffering.

Then the police murder, on my new doorstep, of George Floyd sparked a global uprising for human rights and against the deep-rooted, systemic anti-Black racism of the United States. I began thinking deeper about how to use the financial privilege that I have—not just earning my living helping local and POC-directed enterprises survive and thrive, and not just donating, or directing my consumer dollars thoughtfully, but making sure that I know who is benefitting from my retirement savings.

Enter The Next Egg, a community that supports each other in the technicalities of moving our nest eggs out of Wall Street’s pockets and onto Main Street. Within this calendar year, I will be rolling over my retirement savings from a traditional IRA to a solo 401(k), from which I will get to choose how to invest my funds. There is a lot to learn, and even though using my retirement funds for good is a long-standing dream of mine, I don’t believe I would have taken the plunge without The Next Egg‘s support.

I’ll post more here as I go through the process, and I encourage anyone who is interested in doing the same to join The Next Egg (a subscription is $9.99/month) for their “In an Eggshell” webinars on the basics of solo 401(k)s, self-directed IRAs, rollovers, borrowing from your funds, and more. You also get access to videos of all previous webinars, to community discussions, and to a steeply discounted set-up fee for a solo 401(k) (they usually run about $1,000, and you can get yours for $300 through The Next Egg).

See you at Tuesday’s webinar (June 23, 5-6 PM EDT) on COVID, Rebellion, & Retirement!

A screen shot of the The Next Egg's upcoming seminars in self-directed retirement investment in your community. Text in caption.
The Next Egg’s upcoming (June 23 – Oct 16) webinars. Tuesday, June 23, 5-6PM EDT: COVID, Rebellion, & Retirement: A discussion about the role of our nest eggs in this emerging political moment. Friday, July 17, 12-12:30 PM EDT: How to Borrow from Your Existing 401(k) or 403(b). Friday, August 14, 12-12:30 PM EDT: Solo 401(k) Basics. Friday, September 18, 12-12:30 PM EDT: Rolling Over Your Retirement Savings. Friday, October 16, 12-12:30 PM EDT: Self-Directed IRAs.


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