401k CARES Act withdrawal limits have been updated in response to the CARES Act recently signed into law updating 401k withdrawal limits.
CARES Act 2020 401k Withdrawal Updates – Effective March 27, 2020, you can take a 401k CARES Act withdrawal of up to the lesser of $100,000 or 100% of your vested 401(k) Plan account balance. You also have the ability to take a hardship withdrawal from the 401(k) plan that is exempt from the normal 10% early withdrawal penalty and repayable within three years.
Some of the Pros of taking 401k loans and hardship withdrawals include:
Instant capital can be received from your 401k retirement account with very minimal effort. Most 401k plans offer online 401k hardship withdrawals that can get you money within a matter of a few days with no credit checks, impacts to your credit, or a lengthy application process.
Another benefit of the 401k CARES Act withdrawal is the fact that the money can be used for anything, although it is highly suggested that you create a plan for how to use a 401k withdrawal properly to get the most bang for your buck. Eliminating high-interest debt, especially high-interest credit card debt is one of the best uses for 401k hardship distributions.
Some of the Cons of taking 401k withdrawal Include:
Borrowing money from your 401k is also taking money away from your future to pay off past debts or to support your current lifestyle. Taking a look at your entire financial picture, including your spending habits will help you determine if a 401k withdrawal is right for you.
Lastly, the money that you take from your 401k will not be able to benefit from capital appreciation or dividends. This potential loss in investment gains could be devastating in the long run, so you should make sure that all of these factors are discussed when determining is a 401k CARES Act withdrawal right for me?
In summary, if your planning on using a 401k CARES Act withdrawal to consolidate debt or pay off high-interest debt then 401k withdrawals can be a great alternative to traditional financing. Just make sure you read your 401k plan documents thoroughly and have a plan for exactly what you’re going to do with your 401k withdrawal proceeds.
0:00 – Intro
1:17 – What is a 401k withdrawal
2:46 – What are the consequences of taking a 401k withdrawal
6:42 – 401k CARES Act Withdrawal
7:34 – What can 401k withdrawal funds be used for
8:13 – What are the consequences of taking a 401k CARES Act withdrawal
10:41 – Who is eligible to receive a 401k CARES Act withdrawal
12:05 – Outro
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LEARN MORE ABOUT: 401k Plans
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In the wake of the COVID-19 pandemic, many Americans have suffered financial difficulties. As a response to the crisis, the CARES Act was signed into law, allowing individuals with 401k plans to withdraw funds without penalty.
However, before taking a withdrawal, it is important to understand the difference between a CARES Act withdrawal and a normal 401k withdrawal.
A normal 401k withdrawal occurs when an individual takes money out of their retirement account before reaching the age of 59 and a half. In these situations, there is usually a penalty fee of 10% in addition to the income tax owed on the amount withdrawn.
On the other hand, CARES Act withdrawals allow individuals facing certain coronavirus-related hardships to take out up to $100,000 from their 401k plan without penalty or tax if repaid within three years. This waiver of the 10% penalty fee applies to all individuals, regardless of age.
While it may be tempting to take a CARES Act withdrawal, it is important to consider the long-term effects on your retirement savings. A 401k withdrawal, whether under normal circumstances or through the CARES Act, will reduce your overall retirement savings, and could also hurt your ability to take advantage of future stock market upswings. Additionally, if the withdrawn amount is not repaid within the allotted three years, taxes will still be owed on the amount taken out.
Before making the decision to take a 401k withdrawal, it is important to evaluate all other options and weigh the potential consequences. Consulting with a financial advisor can also provide valuable guidance on the best course of action based on individual circumstances.
In conclusion, while the CARES Act provides relief for individuals struggling financially during the pandemic, it is important to carefully consider the implications of taking a 401k withdrawal. Withdrawing from your 401k may provide immediate relief but may create long-term consequences for retirement savings. Personal circumstances and long-term financial plans should be evaluated before making the decision to take a 401k withdrawal of any kind.
With the recent passing of the Consolidated Appropriations Act, the 401k CARES Act withdrawal program has been extended. Check out the latest updates on my most recent video – https://youtu.be/6cmi3_Ha8bw
My husband is going to be 62 years old next January. He wants to retire and take out all his money from his 401k.
He wants to pay off debt. Do you advise him to do it.
Can you withdrawal for personal reasons?
Very good video
Can you still do a Cares Act 401k withdrawal?
Fact is, though the 401k, IRA, name it are one of the safest retirement plans, they are not particularly good options. Better strategy; Live below your means, Invest 20-30% of your income into the stock market but of course, be well informed about where you want to put your money… I made my first million earlier this year from stocks alone with about 550k after I dissolved my 401k and added little cash (through the help of a pro though). Greatest decision I ever made.
Excellent video.
The first time I’ve ever seen another black man named Stacey outside of a movie lol great content
My job forgot to pay me, my entire check, because someone didn't submit my hours. They said on Friday it was corrected, submitted & Approved. But may take up to one week & no payment advance. There's no exact Direct Deposit date & that has me in the "The Unknown-What If Lane??" My new car needs to be fixed & stalled on me. My Father has COVID19, we're Quarantine & on leave. But my rent is due on the Feb 1st. Can I request a withdrawal to avoid an eviction? Or must I wait until I have the actual notice & then request the withdraw? I know I'm definitely experience many hardships. However, I understand there certain guidelines, that must be followed. Can you please advise? Thank you for your valuable time & efforts.
I like how you think I have like 100,000 in my account. Think under 5,000 lmao
Official!!!
I’m not scared ima withdrawal everything when I figure this out
Thank you so much for the info. Kind of late for me but I was terminated from my job this November for not taking the * so I am looking into withdrawing some of that 401k money.
This is why I recommend a Roth IRA. As long as you have had the account for 5 years you can literally withdraw as much as you want for free as long as it’s not including capital gains tax
I realized that the secret to making a million is saving for a better investment. I always tell myself you don't need that new Maserati or that vacation just yet. That mindset helped me make more money investing. For example last year I invested 80k in stocks (with the help of my Financial Advisor of course) and made about 246k, but guess what? I put it all back and traded with her again and now I'm rounding up close to a million.
Having an investing coach assist you in decision making really helps you avoid some basic mistakes.
We have another option fema sponsored hardship withdrawal what do you think and what are the rules
who charges the 20% and who charges the 10% for the 401 withdrawals? and how would the IRS know that the 401k was withdrawn?
Great video. Would I have to still pay taxes if I withdraw from Roth 401k account under CARES ACT?
TIA.
Hello and THANK YOU FOR SHARING SIR! I do have a question. Should I borrow from a credit union @ 6% or should I take money from my 401K as a loan or a withdrawal? I'm looking at around 40K. Thank you in advance. :)>
What if you already have a 401k loan out can you still take out a loan using the care act
I'm interested in withdraw. I was terrified of the penalties.
Can you also pay your taxes on your withdrawal in 3 years
I tried to withdraw in November. Using the cares act.. The rep laughed at me and said “we don’t recognize the cares act or any hardships.” Apparently the only way is I have to not contribute to it for 12 months. Wtf kind bs is that. Im about to lose my house. Idk what else to do other than quit my job that’s furloughed me since sept.
Shut off all contributions before you do it. They made me take two very small loans and didn’t explain that I needed to clear an account before accessing funds. It was a bullshit way to keep me from my money.
Very good information. Thanks.
Thank you for the info. If I took a hardship withdrawal from my 401k for the purchase of my first home but still had a qualifying event can it be considered pandemic related and paid over 3 years?
nice video, smart guy. I just subscribed