Should I withdraw from my retirement plan during shelter in place?

I have been asked if I think people should take money out of their retirement accounts during this time of trials.   Given talk of eliminating the early withdrawal penalty for those effected by the stay at home order, it does seem like an option. 

My short answer is that you have to do what you have to do, but please make a retirement withdrawal your last option.   First, it is very hard to get money into a retirement account with all the restrictions.  Second, retirement accounts grow either tax deferred or tax free.  Third, as a general rule, retirement accounts can not be reached by creditors.  Fourth, in a bankruptcy most retirement accounts are exempt and will not be taken by the court.

All of these factors make retirement accounts worth more than just the dollar amount in them.   Many times, I have seen someone make withdrawals from retirement accounts and then still struggle and have to come see me.  At that point, they file for bankruptcy and now they have no retirement.   If they had gotten advice first, then they would have known their options and they may have been able to deal with their debts and still have a retirement.  I have seen this cost client tens of thousands of dollars. 

So, here is what I suggest as other options.   First, call you creditors.  Many lenders (both for credit cards and for auto loans) are allowing customers to skip a month or two of payments.   You should also contact your mortgage company, and I have heard of several local landlords who are working with those effected.   You have nothing to loose and it could give you time to plan your course.   There are other articles out there with advice about selling items and finding a part time job etc.  I will let you evaluate those as options as they may or may be practical in our current situation.

Our focus right now should be on delaying big decision until we know more about the future.  In the meantime, preserve assets and keep your options open if you can.  Hang in there and stay healthy.