Generally, a retirement account should be one of the last places you take money from. However, if you need the money during this emergency, the IRS allows for Coronavirus Related Distributions of up to $100,000 in 2020 if you:
- Have been diagnosed with COVID-19
- Have a spouse or dependent who has been diagnosed with COVID-19
- Experience adverse financial consequences as a result of being quarantined, furloughed, being laid off, or having work hours reduced because of the disease
- Are unable to work because they lack childcare as a result of the disease
- Own a business that has closed or operate under reduced hours because of the disease
- Meet some other reason that the IRS decides to say is okay.
If one of these exceptions applies, you may make a distribution without the normal 10% penalty if you are under age 59 1/2. You will still owe income taxes on the distribution (if applicable), however, you may pay those taxes over the next 3 years. Alternatively, you can repay the full amount to your account over three years and avoid income tax completely.
If you have questions about the tax implications you should consult an accountant or tax professional.