Jack Woods


Central Business Solutions 

301 Lynnfield Street, P.O. Box 3169 Peabody, MA 01960


Phone:  978-532-0266

Fax:      978-532-9105


1147 Main Street, Suite 213, P.O. Box 299 Tewksbury, MA 01876


Phone: 978-851-8044

Fax:     978-851-9332


Email: jack@cbps.com

June 2020

June 2020 Client Profile

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At the beginning of the year, Phil, age 40, took out a 401(k) loan to use as a down payment on his new home. When the coronavirus hit, Phil was laid off from his job at a travel tech firm as flights all but came to a standstill.

Along with the bad news of losing his job, Phil also fouund out that his outstanding 401(k) loan balance of $20,000 will be due in full by April 15, 2021. What options are available to Phil?

To date, there have been no relief provisions provided for this situation in any of the COVID-19-related federal stimulus packages. As a result, the old rules apply. Phil must either repay the full loan balance by the deadline or treat the amount as a distribution. In the first scenario, he must save over $1,600 each month for the next 12 months in order to pay back the loan by April 2021.

In the second scenario, Phil has to pay a 10% withdrawal penalty since he’s under 55 years old and must pay income tax. Depending on how quickly he returns to work, the distribution may even bump him up into a higher tax bracket.

Client Profile is based on a hypothetical situation. The solutions we discuss may or may not be appropriate for you.


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