BATON ROUGE, La. (WAFB) - The COVID-19 pandemic may have thrown our future financial plans off track.
A recent survey by Magnify Money and Lendingtree shows three out of ten Americans have dipped into their retirement savings accounts in the last two months. The survey also says those who took money from their retirement accounts spent that money on groceries and housing bills.
Local wealth advisor, Ernie Burns, says it’s likely people are withdrawing from retirement funds because their emergency savings funds are dried up.
The CARES Act has a feature that gives people the option to access their 401k or IRA through this difficult time and not pay the 10% penalty upfront. Burns says reaching into your retirement fund early is not ideal, but might be necessary.
“You’re losing years of growth factors there for the future in compounding interest,” said the CEO and president of Burns Estate Planning & Wealth Advisors. “However, if you haven’t worked in six months, let’s say your job skill is very, very specific and your company has not hired you back, maybe you don’t have an option.”
Pulling from your retirement fund may be a last resort option, but it’s a better move than racking up credit card debt. Burns says it might be best to take on a job that you’re a bit overqualified for just to bring in regular cash flow again.
When it comes time to building up your retirement savings pot, the local wealth advisor says talk with a qualified finance professional to make more deliberate moves with your money.
“Start taking sectors of the market more seriously instead of generally throwing more money at the market or basically just adding money to your 401k,” he said.
If you do take money out of your retirement account right now, you have up to three years to pay back taxes on that withdrawal to the IRS.
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