Money Magazine: How to Get Back on Track After Tapping Into Your 401(k) in a Financial Emergency
Dylan Telerski / 16 Jun 2020
A survey taken in May from Principal Financial Group found that 1 in 10 workers plan on using their retirement account to relieve COVID-related financial hardships.
Yes, one of the perks of saving in your company’s 401(k) is the ability to tap into your 401(k) as an emergency source of cash. In fact, thanks to the pandemic stimulus package known as the CARES Act, it’s easier than ever for retirement savers to access their funds to relieve financial burdens.
Prior to the coronavirus pandemic, if you were under age 59½, taking a distribution from your 401(k) would trigger a 20% federal tax hit and a 10% early distribution penalty.
Thanks to the CARES Act, an individual can now take a withdrawal of up to $100,000 from eligible retirement plans, including 401(k) plans and IRAs, without the 10% penalty applying.
While withdrawing or taking a loan from your nest egg might help keep you afloat, but financial experts warn that you should aim to recharge your retirement savings as soon as possible.
Ubiquity Retirement + Savings Founder and CEO Chad Parks spoke with Money Magazine about things you need to know if you plan to take advantage of this provision, and how to move forward once your finances are stabilized.