What You Should Do If You Raided Your 401(k) During The Pandemic

what-you-should-do-if-you-raided-your-401(k)-during-the-pandemic

If you dipped into your retirement funds during the pandemic, you have lots of company. But you need to start thinking about replacing those funds.

A recent poll found that some 60% of those surveyed raided their their 401(k)s or IRAs. Millions, of course, were either laid off or put on furlough during the crisis. If they didn’t have emergency funds, their retirement funds were a source of cash.

According to the survey, the reasons varied for tapping retirement kitties:

In addition to covering everyday living expenses, 41% of those polled said they used their distribution or loan to pay medical expenses, while:

  • 32% said the money was used for home repairs
  • 26% used the money for auto repairs
  • 23% paid tuition
  • 21% helped family members

While Congress gave Americans a break on these distributions, it was no substitute for replacing the savings: The CARES Act permitted people under the age of 59½ affected by the coronavirus to withdraw up to $100,000 from an IRA, 401k, or similar account without penalty. It also permitted loans of up to$100,000.

How do you replace retirement savings? Here are three suggestions:

1) If you don’t have one — and you’re able to do so — start an emergency fund. Keep the money in a federally insured money market fund.

2) Look for assets that can be liquidated that can be put back into retirement savings or emergency funds. Do you have a cash-value life insurance policy? Coins or jewelry that can be sold?

3) Assuming that you’re working again, you can boost your contributions to your retirement funds. Ask your employer to increase your withdrawals.

(Photo by JOHANNES EISELE/AFP via Getty Images)

AFP via Getty Images

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