CARES Package Question
We have a 48 year old client who has not lost his job, but his income has been reduced since he can’t travel. He is wanting to cash out his Roth IRA to pay on his 10 year mortgage. Would the Cares Package cover him on taking money out without taxation and a penalty on the earnings?
Permalink Submitted by Alan - IRA critic on Mon, 2020-07-20 21:00
He likely qualifies for a CRD, but more details are needed. If he qualifies, he can take a distribution from any eligible account which includes a Roth IRA. For a Roth IRA distribution, his regular and conversion contribution basis is available without tax or penalty, but earnings which come out last would still be subject to tax but no penalty. He would then have 3 years to repay the distribution with any repaid amount being applied first to earnings. If his taxable income will be down however, he might want to consider a pre tax CRD to preserve his Roth balance at a time when his marginal rate might be reduced. Or he could split the CRD between the two IRA types. He might also look into re financing the mortgage.