COVID-19 - Review your 401(k) Options
The current crisis is impacting millions of hardworking and responsible Americans who suddenly find themselves in a financial crunch they could never have imagined only a few months ago.
• Leave the 401(k) with your employer plan
• Roll over to a new employer
• Roll over to an IRA
• Withdraw or cash out the 401(k)
New rules under the CARES Act allow you to take an early distribution of up to $100,000 from a retirement account in 2020 penalty-free, as long as it’s related to the coronavirus. Taxes on withdrawals can also be spread out over three years, Plus, you can avoid the taxes entirely if you pay back the distribution within three years.
Your present situation may be difficult, but you still have to protect your future. While your 401(k) could be a resource, use it only when absolutely necessary. If you have other sources of cash you may want to explore those options first.
It’s important to understand differences in fees, taxes and risks with all your 401(k) options. Discuss your situation with a tax and financial adviser.
Excerpts from The Epoch Times, July 8-14, 2020 “Laid Off and Worried About Money: What to DoNext?” by Carrie Schwab-Pomerantz, a certified financial planner, president of the Charles SchwabFoundation and author of “The Charles Schwab Guide to Finances After Fifty.”