Thanks to the CARES Act, 401(k) plan participants have been able to take emergency withdrawals of up to $100,000 from their accounts without incurring a 10% penalty. As a result, there has been a dramatic increase in inquiries about early withdrawals—especially among workers in industries suffering high employment due to the pandemic such as retail, food service, transportation and entertainment.
According to a recently-published research paper, savers with higher income levels and account balances were less likely to request early withdrawals. While this might not come as a surprise—given that those with larger account balances likely have other accounts that they can draw on as a “rainy day fund”, more surprising were the findings regarding the activities of people who managed their own retirement accounts. Those who managed their own funds were much more likely to investigate the possibility of an early withdrawal compared to those in target-date funds, or those who opted for managed accounts.
You can learn more about now only this recent research, but also its implications, via this recent article published by Investment News.
401(k) defaults linked with lower CARES Act withdrawals
This article was originally published in Investment News.