| More than 1 in 4 Americans are raiding their retirement accounts after a coronavirus-related job loss | | |  | WED, MAY 27, 2020 | | | | A 401(k) plan has been the foundation of retirement security for most Americans. Sadly, for those who have been impacted financially by the pandemic, it's very difficult to think about the future when the present is so overwhelming.
That's why it's not surprising that several studies have shown that many Americans are raiding their retirement accounts to pay for basic necessities, including groceries and household bills. Additionally, more than 25% of people who've withdrawn retirement funds in the past two months said they did so after a job loss, while only 15% said they'd pulled money out of retirement accounts because they're worried about stock market losses.
Overall, financial advisors believe individuals should never borrow from their 401(k) plan. In general, they feel it's a really bad idea and believe people should exhaust every other option available to them before touching the money they are saving for retirement. While that may be true, using that money has become a last resort for many people.
Experts say that a 401(k) plan withdrawal does make more sense for someone who has been laid off and doesn't have a safety net or enough saved for basic expenses over the next three to six months.
With that said, if you need to tap that 401(k) plan, financial experts suggest you consider the following:
- Explore all your options for getting cash before tapping your 401(k) savings.
- Every employer's plan has different rules for 401(k) withdrawals and loans, so find out what your plan allows.
- Your workplace retirement plan may offer a CARES Act withdrawal option. If you qualify, it might be an option to consider.
- If you don't qualify for a CARES Act withdrawal and you are able to make repayments, a 401(k) loan may be a better option than a traditional hardship withdrawal, if it's available. In most cases, loans are an option only for active employees.
- And, if you opt for a 401(k) loan or withdrawal, take steps to keep your retirement savings on track so you don't set yourself back.
For more key stuff like this, please follow me on Twitter @jimpavia and check out CNBC's Financial Advisor Hub and CNBC + Acorns Invest in You: Ready. Set. Grow.
In an effort to assist our audience when it comes to money, we urge you to sign up for our 8-week learning course to financial literacy, plus get tips on managing your money during times of crisis, delivered to your inbox. Visit: www.cnbc.com/money101/. | | Here are the top 10 cities for summer staycations | | Amid the coronavirus pandemic, many Americans will opt to vacation at or near home this summer. Personal finance site WalletHub ranked 180 U.S. cities from best to worst for "staycations." Here's a look at the top — and bottom 10 finishers. | | | | | |
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