You need to have a plan for your 401(k): Bone Fide Wealth president

Douglas Boneparth, Bone Fide Wealth president and CNBC Financial Advisor Council member, joins 'Power Lunch' to discuss how to examine your 401(k) during the market volatility.

Cash-strapped Americans struggling with the fallout of coronavirus may soon be able to tap into their retirement savings to cover bills, loan payments and everyday expenses. But experts say that while it’s tempting to cash in, Americans should exhaust every other option first.

Late Wednesday, the Senate unanimously passed a $2 trillion stimulus package called the CARES Act — the Coronavirus Aid, Relief, and Economic Security Act — that boosts unemployment insurance payouts and aims to send relief checks to many Americans. To provide additional ways for Americans to access cash, the bill also allows people to take a withdrawal of up to $100,000 from their retirement savings, including 401(k)s or individual retirement accounts, without the typical penalty.

In the past, if you need to access those funds before age 59½, you generally have to pay a 10% penalty on any amount you take. The general exceptions to that rule include education expenses, buying your first home, covering massive medical debts or being ordered by a court to provide alimony or child support. If you’re over age 55 and you’ve lost your job, whether you were laid off, fired, or quit, you can also pull money out of your 401(k) or 403(b) plan from your current employer without penalty.

While the new withdrawal exemption may help cover the short-term expenses associated with coronavirus, experts say Americans should think twice before tapping into their retirement funds.

“It sends a signal to people that this is a normal thing to do — and up to $100,000 — that’s crazy,” Monique Morrissey, an economist focused on retirement security at progressive think tank Economic Policy Institute, tells CNBC Make It.

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