The IRS Notice 2020-50 also made clear that any distribution received by a qualified individual can be treated as a coronavirus-related distribution, even if the distribution is made from a beneficiary IRA or beneficiary account under an employer-sponsored retirement plan, and the income from such amounts are eligible to be spread ratably over 3-years.

In addition, the new guidelines clarified several other areas on distribution, recontribution and taxes.

But Cathy Clauson, senior vice president for retirement at AssetMark, cautions against jumping at the opportunity to borrow from your retirement savings. While she applauds the government for allowing people to take money out penalty-free and spread the taxes over years, she said it should be a last resort.

“You don’t just do it because you can," she said. "Do it because you have to.”

Clauson noted that the borrowing is meant to be short term, and it should be just that.

"If you have to do it, pay your rent or mortgage and feed your family by all means," she said. "But the minute you don’t need it that way anymore, you should put it back as soon as you can, even if it’s $100 at a time. That’s the only way you are not going to significantly derail your retirement savings and your retirement plan.”

 

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