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401K Withdrawal - CARES ACT

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Hi,

 

The way that I understand it, The CARES Act waives the additional 10% penalty tax on early withdrawals up to $100,000. Anyone who takes a distribution will need to pay income tax on those withdrawals unless they pay it back within 3 years. If you go this route, does this mean that you could contribute the usual max limit in 2021 and then contribute the withdrawal amount (repayment) on top of that in the same year to avoid paying taxes on the distribution?

 

And I take it that if you switch employers any qualified 401K loan works for the repayment of the distribution?

 

Thanks All

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My understanding from some cursory reading is that you can make a withdrawal OR take a loan.  

 

I don't see anything that says you can "repay" a withdrawal.  

 

The 3 year repayment window refers to the taxes that are due on the money that's withdrawn.  Normally those would be due in one tax year, along with the 10% early withdrawal penalty.

 

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Thanks. I think I answered part of my own question here: "Taxes for distributions can be paid over three years, or you can repay the amount withdrawn within three years, in addition to making the maximum contribution amount allowed each year. The rules pertaining to taxes have yet to be finalized." https://www.bankrate.com/retirement/cares-act-and-retirement-funds/

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56 minutes ago, lexx1231 said:

Thanks. I think I answered part of my own question here: "Taxes for distributions can be paid over three years, or you can repay the amount withdrawn within three years, in addition to making the maximum contribution amount allowed each year. The rules pertaining to taxes have yet to be finalized." https://www.bankrate.com/retirement/cares-act-and-retirement-funds/

Even better.

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10 minutes ago, Cactus Flower said:

I also understood that you had to be in a hardship situation to do this...

can't just do it because you want to.

 

 

Not according to my HR or what I read but I could be wrong.

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