The CARES Act Lets You Tap You Retirement Savings Early -- but Most People Aren't Doing That

The U.S. jobless rate has been skyrocketing ever since COVID-19 cases started multiplying in March. In response, the CARES Act was passed later that month to provide much-needed relief. Among other things, the CARES Act boosted weekly unemployment benefits, allowed for a one-time stimulus payment, and gave savers the option to tap their 401(k)s or IRAs if circumstances related to COVID-19 created a financial need to do so.

Normally, early retirement plan withdrawals -- those taken before age 59 1/2 -- are subject to a 10% penalty. Under the CARES Act, that penalty is waived for distributions of up to $100,000. And with so many Americans unemployed, you'd think people would be clamoring to raid their savings to cover near-term expenses.

But surprisingly, most people aren't tapping their retirement savings. Vanguard reports that only about 1% of savers initiated a distribution related to COVID-19 despite the fact that 99% of retirement plans allow for it. And among those who did take a withdrawal, only 3% withdrew the maximum amount allowable under the CARES Act.

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Source Fool.com