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Dear Liz: I used the Coronavirus Aid, Relief, and Economic Security (CARES) Act to cash out my 401(k). The contributions would automatically stop if your paychecks stop since they are salary based. The money you take out may be gone forever unless you can replace it … The maximum loan you can take from a workplace retirement plan is doubling, from $50,00 to $100,000, during the COVID-19 pandemic. This applies to traditional IRAs and retirement plans. You can either add the entire amount to your taxable income for the current tax year and pay it all off April 15, 2021, or you can space it out over the course of three years, as per the CARES Act. The Coronavirus Aid, Relief, and Economic Security Act, commonly known as the CARES Act, allows employees to take a distribution (when you take money out of an account) that waives the 10% early withdrawal penalty if eligible for COVID-19-relief, as described above. That’s double the $50,000 maximum that usually applies to 401(k) loans. The law permits withdrawals up … Borrowing from Your 401k During COVID? Then, a lump sum distribution is not subject to the penalty. What To Consider When Cashing Out Your 401(k) If you’re strapped for cash, having access to the money in your 401(k) is tempting. Know the Risks First. My ex-employer waived the 10% penalty but withheld 20% for federal taxes. But, it will still be taxed. "If they are taking out $50,000 or $100,000, they are going to set themselves back by that same amount. ... and borrowing from your 401k is no problem - you can easily pay the money back. (Usually, if you take a distribution from a 401(k), taxes are due on it on the following Tax Day.) The CARES Act has made it easier for those directly facing financial and health issues from the effects of the coronavirus pandemic to cash out retirement funds. If you withdraw money before age 59 1/2, you'll pay a 10% early withdrawal penalty. It's just a matter of whether you want to pay the penalty. Part of the CARES Act allowed individuals to tap IRAs or 401(k) retirement plans if they were impacted by the coronavirus and needed cash. Joe Biden leading a recent poll is an "election risk" for investors and the markets will react to anticipated tax hikes, FOX Business' Stuart Varney argues in his latest "My Take." There's an exception if you leave your company after age 55. You can take money out of your 401(k) anytime you want. But taking money out of your 401(k) during COVID-19 can affect your retirement. With the new rules, you might be able to take a penalty-free distribution from your 401(k) or your IRA. While you typically repay a 401(k) loan back over five years, the CARES Act lets you hold off on making payments for a year. You can also borrow up to $100,000 or 100% of your vested balance if you’re impacted by coronavirus. 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