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At least 2 million US workers dipping into 401(k)s for cash amid pandemic: report

At least 2 million US workers dipping into 401(k)s for cash amid pandemic: report

At least 2 million U.S. workers have tapped into their 401(k)s and retirement plans for funds amid the nearly yearlong coronavirus pandemic, according to the largest financial planning administrators.

Top financial planning companies Fidelity, Empower Retirement, Vanguard, Alight Solutions and Principal, reported more than 2.1 million Americans have pulled funds from retirement planning accounts since the economy took a hit due to the pandemic in March, The New York Times reported.

The estimated number of Americans making those withdrawals accounts for about 5 percent of those top financial administrators' client base. Still, the number of withdrawals and the average amount taken is higher than a typical year.

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The average cumulative withdrawal per client in 2020 was around $20,000, usually spread between two or three separate transactions. That estimate is more than three times as much as the typical hardship withdrawal, which has averaged less than $6,000 in a single-year period for the past seven years.

“People are taking just what they need, and they are trying to minimize the impact to their overall savings,” said Jeanne Thompson, senior vice president for workplace consulting at Fidelity. “There is a recognition that 401(k)s will be their primary source of income, and people don’t want to raid it unless they have to.”

The CARES Act approved by Congress in March temporarily suspended 10 percent penalties from funds pulled out of tax-deferred accounts, which likely convinced more Americans to withdraw more money than in an ordinary year.