Retirement savings withdrawals change under the CARES Law.

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CARES, the law just passed by President Trump, contains many provisions for those who save and live in retirement. But experts say those who can take advantage of the new law have a lot to consider.

The law temporarily relaxes the rules on hardship distributions from retirement accounts, giving those affected by the crisis up to $ 100,000 of their retirement savings without the usual 10% penalty.

The law also doubles the amount that 401 (k) participants can take out loans from an account for the next six months at the lowest of $ 100,000 or 100% of the account balance. IRAs do not allow loans.

The new rules apply to a wide range of people, including those who have lost their jobs due to the pandemic, those who suffer from COVID-19 or who have a spouse with the virus.

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Close up of a 401 (k) declaration.

If your emergency savings fund is low, it may make sense for you to use your 401 (k) to overcome the COVID-19 pandemic, says Keith Whitcomb, director of analysis at Perspective Partners. “The CARES law is designed to improve this financial alternative,” he says.

Is the money worth the disruption?

Although the new law offers more options for people who are experiencing financial difficulties, think carefully before you act.

Having to sell investments at a much lower price in COVID-19-induced stock market liquidation, your 401 (k) can become a potential source of funds, says Whitcomb. “It is true whether you borrow or withdraw a difficult account from your account,” he says. “However, if your 401 (k) has assets in cash or short-term bonds that have not been affected by the market downturn, it may be wise to sell these investments in order to generate cash. “

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