CARES Act – An Overview for Seniors and Their Families

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) was passed by Congress and signed by President Trump last month.  It is a $2 trillion aid package with a lot to it.  Because of the speed with which it was written and passed, there is much confusion about what’s in it and who is eligible.  This week’s post is meant to provide an overview, however, the details and exceptions are far more complicated than can be covered here.  The following, however are some of the provisions that may be relevant to our clients and their families.

1. Stimulus payment – Up to $1200 per individual ($2400 per married couple if you file a joint income tax return) plus $500 for each qualifying child.  You qualify for the full payment if your adjusted gross income as shown on your 2019 tax return (or 2018 return if you haven’t filed 2019 yet) is $75,000 or less ($150,000 if married filing jointly).  You can qualify for a smaller amount if your AGI exceeds $75,000 but you get nothing when you reach just under $100,000 ($200,000 if married filing jointly).
2. Mortgage forbearance and renter protection – If you have a federally backed mortgage you can write to your lender to ask for a 6 month forbearance on making your payments.  The lender cannot charge you additional fees, penalties or interest for doing so beyond what it would normally charge you if you made the payments on time and in full.  You can later ask to extend the forbearance for a second 6 month period.  The Act also provides for a 120 day moratorium for eviction proceedings if you are a tenant in a federally subsidized housing unit or a dwelling covered by a federally backed mortgage loan.
3. If you, your spouse or dependent has been diagnosed with Covid-19 or experienced adverse financial circumstances because of it you may be able to withdraw money from your IRA or 401k without paying the 10% early withdrawal penalty (which you would otherwise pay if you haven’t reached age 59 and ½).  You still must pay the tax on the withdrawal but you can stretch the tax out over 3 years.  Check with your retirement plan administrator because the plan terms must first be updated to allow for this option.  You can also now borrow up to $100,000 from a 401k if you take the loan no later than 9/22/20 but there are tax ramifications if you then are unable to pay the loan back before you leave your employer or lose your job.
4. The need to take required minimum distributions (RMD) is waived for 2020.  This may be helpful to retirees who don’t need the money which is just accumulating in a nonretirement account.  For others who need the money to pay bills this provision won’t be of any help at all since you still must pay the tax on withdrawals.
5. Payments on federal student loans have been suspended through 9/30/2020.  This is helpful for parents and grandparents who are making payments on student loans for a child or grandchild.

There are other provisions in the CARES Act that are not summarized here such as the Paycheck Protection Program that provides loans to small businesses to help pay their employees and provisions that target the health care industry.  Also, keep in mind that these benefits are provided by the federal government.  Many states have provided other benefits and passed their own laws that may be of benefit to individuals as well.  Finally, certain industries may also provide assistance.  For example, some insurance companies are offering to reduce premiums on auto insurance policies.  Call your insurance carrier to find out if you are eligible for any available discount.