As the coronavirus crisis is affecting the market in quite negative ways, many of us are wondering what will happen to our 401K accounts. Many are also wondering if we can actually use our 401k savings in case of emergency during the crisis.
My $0.05:
Here are a few guidelines you may want to consider:
- If you’re able, keep contributing to your 401k:
- If your employer matches your contributions, it’s basically free money that you would pass up if you stopped contributing.
- While the stock market may have experienced many losses in the past few days, this also means there are opportunities to buy some shares of stock on sale. If your 401k contributions are going towards building a diversified portfolio, you should be able to see positive returns in the long term
- Emergencies can definitely happen in a crisis, especially considering this is a largely unexpected one. However, tapping into your emergency fund first before tapping into your 401K may be best. If you really need to tap into your 401k funds in this period, you are in luck!The Coronavirus Aid, Relief and Economic Security Act now allows you as a retirement account participant to withdraw up to $100,000 for coronavirus-related expenses. Loan limits on your 401k have also been increased to 100% of the vested balance, up to $100,000. Individuals taking the coronavirus emergency also have the option of reimbursing themselves at any point
- In addition, the related income tax due on such withdrawals can be paid over three (3) years.The contribution deadline for the 2019 IRA contributions has also now been pushed to July 15, 2020.
- Last but not least, retirees over 72 years old now have the option of delaying taking their minimum distributions as required in 2020.
Take care and stay well,
The Corporate Sister.
