Among the recent benefits offered by the US Government and IRS due to Covid-19, many were overshadowed by the Economic Stimulus payment.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) included other provisions to assist those facing financial hardship as a result of Covid-19, one such being easier early withdrawals from US based retirement funds.
Specifically, for those directly affected by the virus, the 10% early withdrawal penalty on retirement funds such as an IRA, 401K, etc. This is a temporary change, whereby you may currently withdraw up to $100,000 USD from these funds, without facing the 10% early withdrawal penalty (if aged under 59½). The $100K limit is from all funds in which you may own, rather than $100k for each fund.
In order to qualify for the early withdrawal, you must have either:
- Having a spouse or dependent diagnosed with Covid-19
- Experiencing a layoff, furlough, reduction in hours, or inability to work due to COVID-19 or lack of childcare because of COVID-19
- Been diagnosed with Covid-19
In the case that you meet any of the above requirements, you will be eligible to make the early withdrawal. It is important to note however, that NZ and Australia both impose tax on foreign retirement funds in most cases, and no relief will be granted for local taxation.
Whilst this provision under the CARES Act is now temporarily in place, the withdrawal itself will still be dependent on the retirement fund provider, who may impose restrictions.