A recent federal relief package makes it easier for Americans struggling financially due to the coronavirus to tap into their retirement savings. Experts say people should proceed with caution.
It’s tempting for people in difficult financial straits to look to their retirement accounts for help at times like this. But experts urge people to consider all alternatives first.
The Center for Retirement Research at Boston College estimates that about half of today’s working families — before the crisis — would not have been able to maintain their standard of living in retirement. Part of the reason is that people take money out of their retirement accounts early. Alicia Munnell, director of the center, said their best estimate is that about 1.5% of assets leak out each year.
If you still must tap into retirement savings, consider a loan first instead of a withdrawal. A borrower doesn’t face the same tax consequences and there is a lessened impact on your future financial situation because borrowers are forced to repay the loan.
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