As millions of workers find themselves unemployed or with reduced hours, many Americans may consider taking money from their 401(k) accounts to stay afloat.
As millions of workers find themselves unemployed or with reduced hours, many Americans may consider taking money from their 401 accounts to stay afloat, especially since withdrawal penalties have been recently relaxed.
“You should only take the money from retirement funds in extreme circumstances,” said Aaron Clarke, wealth advisor at Halpern Financial. “If this is the case, then of course you shouldn’t suffer in the interim until your employment, or financial situation, changes.”Under the recent CARES Act, you can withdraw up to $100,000 from your 401 without paying the 10% penalty as long as it’s coronavirus-related withdrawal.
“Ask: ‘Is this really a hardship? Or are there other venues I haven’t utilized or considered to increase cash-flow,’” said Michelle Buonincontri, certified financial planner at the firm Being Mindful in Divorce. This could include making special arrangements with credit card companies, auto loans and mortgages to defer payments.
Buonincontri said one of her clients who was short $1,600 to meet his obligations after his spouse was recently laid off. By talking to his lenders, he was able to defer payments on his student loan and personal loan and also refinance his mortgage.
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