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The danger of raiding your retirement plan
The CARES Act was passed to provide much needed relief for those individuals that were impacted by COVID-19 pandemic by boosting weekly unemployment benefits, allowed for a one-time stimulus payment, and gave savers the option to tap their 401(k) s or IRAs penalty-free to deal with near-term financial hardships. Under normal circumstances, early retirement plan withdrawals –those taken before age 59 ½ - are subject to a 10 percent penalty but under the CARES Act, that penalty is waived for distributions of up to $100,000. Although the penalty has been waived, surprisingly, only one percent of savers initiated a distribution related to COVID-19 despite the fact that 99 percent of retirement plans allow for it according to a report from Vanguard. In Maurie Backman’s article for the Motley Fool, she explains why you should avoid taking an early withdrawal from your retirement plan right now. Read Ms. Backman’s article here…
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