It is important to know the facts. There are rare situations where paying off debt with a 401(k) makes sense. Not to mention that with a 401(k) or a traditional IRA, withdrawals before age 59 1/2 trigger a 10% early withdrawal penalty. COVID-19 401(k) withdrawals With many Americans facing financial hardship due to COVID-19, the CARES Act established special rules for 401(k) withdrawals … The coronavirus pandemic is the biggest financial crisis that a lot Americans have ever seen. Understanding the rules of a 401(k) I would not be quick to pay off a credit card using money in your 401(k). The CARES Act made it much easier for Americans to draw down their retirement accounts through coronavirus-related distributions or loans. Individuals affected by COVID-19 can withdraw up to $100,000 from employee-sponsored retirement accounts like 401(k)s and 403(b)s, as well as personal retirement … You can only withdraw ‘elective-deferral contributions’. If you’re scared right now about emergency expenses or paying down debt, you might be tempted to take money from your 401(k), especially considering the new loopholes in the CARES Act that Congress recently passed. Section 2202 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, provides for special distribution options and rollover rules for retirement plans and IRAs and expands permissible loans from certain retirement plans. 3. But is a 401(k) withdrawal a good idea? This is particularly important if you’re considering 401k withdrawals during coronavirus. Get a balance transfer credit card. Bronnenkant: Taking a coronavirus-related distribution from a retirement plan to pay off a mortgage has its pros and cons. If you are thinking of getting a 401(k) loan to pay off high-interest credit cards, a … Few people are tapping 401(k)s, even without withdrawal penalties Is the Trump administration leading an "anti-retirement savings movement"? Most people are concerned with how to maximize a 401(k). The CARES Act allows folks in need of money to withdraw from their 401ks with fewer penalties, but that doesn’t mean it’s a free-for-all, or that making 401k withdrawals … The CARES Act waives that for coronavirus-related withdrawals up to $100,000 or 100% of your vested balance, i.e., the balance that’s … 9 OF THE BEST DEBT CONSOLIDATION COMPANIES. Usually, you pay a 10% penalty on early 401(k) withdrawals, which are also known as distributions.