MACON, Ga. — At the end of this month, a lot of pandemic-related financial help will end. There is one place workers can turn for help, but it should only be a last resort.
A lot of workers pay into a 401(k) plan -- you have money withdrawn from your check and a lot of companies will match a certain percentage. Depending on how long you've participated, you could have a nice sum of money for your retirement. Thanks to the CARES Act, a temporary rule change could allow you to access some of that money if you have a financial emergency because of the pandemic.
Financial planner Sherri Goss explains, "Let's say you're a sole proprietor who couldn't get any unemployment. They could only get the federal $600 a week, which ends the end of July, and their business completely shut down because of the virus. Those people, if they have a 401(k), those people could likely take money out to stay afloat."
Here are the temporary changes to 401(k). You can withdraw up to $100,000 penalty-free if you're under the age of 59-and-a-half. Normally, you have to pay the 20 percent federal tax the same year, but now you have three years to pay that tax. You can put the money back into the 401(k) and get a refund on any taxes you paid.
You should only use this withdrawal option in an emergency because you would lose any gains you would have made.
Also, be careful -- that withdrawal could move you to a higher tax bracket.
"The market is moving up and there's no telling with the virus activity, depending on the politics of the election. There's a lot of stuff going on. If you take money out and you don't put it back for three years, you could really miss out on an opportunity," Goss said.
Again, this is not something Sherri recommends and should only be an option if you have nowhere else to turn.
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