In the article “People who tapped 401(k) plan during pandemic are stealing from their future selves, advisors warn,” CNBC turned to benefits and executive compensation partner Fred Reish for his reaction to reports that thousands of 401(k) plan savers pulled money from their nest egg during the coronavirus pandemic.
The news outlet highlighted that since the CARES Act made it easier to pull money from one’s 401(k), individuals withdrew money from their accounts penalty-free. Still, some advisors warn that early withdrawals might end up being costly in the long-term.
“At some point, [retirement savers] need to ask the question, what does this [lump sum] mean? How do I look at this in a way that’s relevant to me retiring one day?” said Reish.
CNBC noted that last year Congress passed the SECURE Act, which requires that 401(k) statements provide an estimate of what one’s account balance translates to in terms of monthly income. More recently, the U.S. Labor Department issued more specific rules around this provision.
Some 401(k) plans and companies already provide such information to savers. Investors in plans that don’t will likely start seeing these projections in 2022, Reish added.