Liquidity is the need for the average American reeling under the onslaught of COVID-19 pandemic that has shredded the economy, which has come funds to a standstill and made life miserable for millions. With unemployment, job loss, and salary loss becoming rampant and growing alarmingly, people’s survival has become extremely difficult. Whether working or unemployed, every American is on the lookout for extra funds to cope with the financial distress resulting from the pandemic.
The desperation to have more cash in hand has driven people to access their 401(k) accounts as well as individual retirement accounts to augment their cash reserve. According to Jared J Davis Sandusky, Ohio, already 14% of Americans have done it, and another 13% who have savings have declared making use of their retirement funds. This is the result of a study of 2400 American adults. Another study confirms 31 million Americans have already made a withdrawal.
Government stimulus has been of help says Jared Jeffrey Davis Sandusky, Ohio
In 2018, 58 million Americans contributed to a 401(k) plan, with many more contributing to other retirement funds, and 85% of Americans have some savings account. Since March, the job-loss numbers have touched 30 million, and it is a fact that most Americans can ill-afford a car repair of $500, which is much less than two months living expenses. Against this background, it becomes clear that not many Americans have dipped their hands into the retirement funds because they have been able to get away with unemployment benefits of $600 a week as part of the government stimulus.
If you want to draw money from your retirement account, you should know how to go about it.
Accessing the retirement fund is easy
Besides offering stimulus checks and unemployment benefits, the federal government has relaxed the rules for the withdrawal of money from retirement accounts so that people affected by the coronavirus pandemic can access the money. As part of the stimulus package amounting to $2 trillion, Americans can withdraw $1,00,000 from their 401(k)s and other retirement accounts without attracting the usual penalty of 10%. However, it requires the employer’s consent to withdraw money, which can be done only during 2020. You get three years to either pay back the money or pay the income tax to retain the money.
The last resort
Despite the ease of withdrawing money from retirement accounts, experts say that it should be your last resort if you are struggling with your finances and find it difficult to make ends meet. After you have exhausted all options and withdrawn money from savings accounts of all kinds, you should lay your hands on the retirement funds. Depending on your employment status and circumstances, you can think about refinancing your debts or trying to tap home equity. Even reach out to family and friends for temporary assistance.
Only is a worst-case scenario when you have no other options left that you can think of dipping into your retirement account.