Hit by the virus and weighing a raid on your 401(k)? Beware

FILE - This Jan. 22, 2020, file photo shows the likeness of Benjamin Franklin on $100 bills in Dallas. Many Americans are struggling financially due to the coronavirus. A recent federal relief package makes it easier for them to tap into their retirement savings by loosening rules for withdrawals and loans. But should they? (AP Photo/LM Otero, File)
FILE - This Jan. 22, 2020, file photo shows the likeness of Benjamin Franklin on $100 bills in Dallas. Many Americans are struggling financially due to the coronavirus. A recent federal relief package makes it easier for them to tap into their retirement savings by loosening rules for withdrawals and loans. But should they? (AP Photo/LM Otero, File) (Copyright 2020 The Associated Press. All rights reserved.)

Many Americans are struggling financially due to the coronavirus. A recent federal relief package makes it easier for people financially harmed by the coronavirus outbreak to tap into their retirement savings for cash by loosening rules for withdrawals and loans.

But should they use them?

Experts say it's an option of last resort and should be done with great caution. A few things to consider first:

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WITHDRAWALS

The CARES Act allows people affected financially by the coronavirus to withdraw up to $100,000 penalty free from eligible retirement accounts during 2020. Previously, any withdrawal before age 59 ½ faced a 10% penalty.

The new withdrawal rules apply to most retirement accounts, such as 401(k) accounts, 403(b) accounts and IRAs. The rules are fairly broad in terms of who qualifies: anyone who has been diagnosed with the virus or has otherwise experienced related adverse financial consequences.

People won’t face a penalty, but they will still have to pay taxes on the withdrawals. However, those tax payments can now be stretched over three years.