Recent changes to the law regarding 401(k) withdrawals.
The CARES Act passed by Congress in late March allows you to withdraw money from your 401(k) account without penalty. Prior to the passage of the CARES Act, if you withdrew money from your 401(k) you would not only have to pay a penalty, but you would have taxes on the amount withdrawn in the same year in which you withdrew the money. The changes in the CARES Act allow you to pay the taxes owed on the money withdrawn over the next three (3) years. The CARES Act also increased the amount of allowed 401(k) loans to $100,000.
Should you withdraw money from your 401k?
You should use the option to withdraw funds from your 401(k) only as a LAST RESORT. Apply for unemployment and take advantage of loan forbearances (which are available on mortgages and car loans) before raiding your retirement fund. Someday you are going to want to retire and will need your retirement account. Plus, the market will bounce back and the more money you keep in your account will allow you to take advantage of the market increases.
Remember, Milby Law Offices, PA is here for you whether you need to file bankruptcy or not. Together we will get through this.