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Susan Tompor: Withdrawing from your 401(k) is a last resort — but CARES Act makes it less risky

Susan Tompor, Detroit Free Press on

Published in Home and Consumer News

Running scared in December? Fearful that the latest job cuts at the restaurant or casino where you work could leave you unable to pay your bills?

Or did you or your spouse get sick or end up in the hospital after testing positive for coronavirus in 2020?

As much as we're trying to hold onto every shred of hope here, the economic outlook for many families remains rocky.

Michigan, for example, resumed some COVID-19 restrictions and initiated a three-week ban in November on indoor bars, restaurants, casinos and movie theaters. On Monday, the ban was extended 12 more days, meaning that thousands of people won't be able to work from Nov. 18 through at least Dec. 20.

So it might be a good time for some who were devastated by loss in 2020 to cover some big bills and make a few moves by Dec. 30.

The piggy bank of last resort — your retirement savings — could present an option for getting more cash in 2020 even if you're in your 30s or 40s.

 

Typically, outside of a pandemic, most retirement experts aren't going to advise you to tap into a long-term savings plan to handle an emergency. But we're looking at a true financial crisis for many families here.

Most times, you'd be better off drastically cutting expenses, digging into a savings or brokerage account, or even borrowing a bit more on your credit card with plans to pay it back relatively soon when you're in the middle of a financial emergency.

For some families, 2020 proved to be an emergency unlike any other and it lasted much longer than many originally imagined.

About 43% of consumers with emergency savings have used that money during the coronavirus crisis, according to a survey released by MagnifyMoney.com, which offers comparison shopping for financial products and is owned by LendingTree.

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