Cares Act- How will this effect the economy down the road?

[ChiBitCTy]

For those of you not familiar with the Cares Act, here is a good guideline of everything that's involved- https://home.treasury.gov/policy-issues/cares

I work in the finance industry and in particular with retirement plans.  The cares act allows for individuals still employed and under 59.5 years of age to take withdraws from their retirement plans, up to $100,000, as well without the normal 10% penalty.  I am constantly getting calls from clients who are utilizing this feature.  In theory it's a good thing for those whom have encountered hardships due to Covid-19, however many are taking advantage of this and simply taking out money just because they can.  

I foresee serious problems down the road with so many dipping in to their retirement, many of which are depleting their entire accounts.  The question I ask myself and everyone else..what are all the negatives consequences likely to come from this?  I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

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[Upgrade00]

I foresee serious problems down the road with so many dipping in to their retirement, many of which are depleting their entire accounts.  The question I ask myself and everyone else..what are all the negatives consequences likely to come from this?  I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

For us to understand the effect it may have, I think we would need to get information on how many people are actually taking the offer, their average age and if they actually need the aid at the time; a 29 year old liquidating their retirement savings can make up that back with more years of work ahead of them and would not be as dependent on the government after retirement as a 45+ year old in the same situation.
Also, one who is currently at a crisis financially would benefit from the scheme to keep a business afloat or provide basic needs.

There is a slim chance that those withdrawing without actually needing the cash at the time are doing so to put that cash in some other investment which they think would be more profitable at the time they are fit for retirement. That would be a huge gamble.

[dothebeats]

There is a slim chance that those withdrawing without actually needing the cash at the time are doing so to put that cash in some other investment which they think would be more profitable at the time they are fit for retirement. That would be a huge gamble.

I'm actually looking at it this way; there would be some people that are withdrawing from their retirement plans to invest the money into something else while it is still possible. We couldn't blame them, given that unemployment is still rising every day and there's not much to do to get some profit/money in the mean time. Some smart individuals will try to make their money work for them even though there's a possibility that they cannot make it in the end, while others are just being honest about their situation and just need the cash ASAP to tend to their basic needs.

The demographics of those taking out some money from their retirement plans, as Upgrade00 pointed, is actually helpful in determining the course of the economy in the coming years.

[fiulpro]

I believe most of the people out there who do need help doesn't even have a retirement plan or even health insurance. Some companies do provide their employees with the same but that's unfortunate that the people belonging to the middle class family and below rarely have time to do stuff like that , especially in underdeveloped and developing countries.
Only the Rich and the well off people can actually make sure to have all the plans well and ready in advance. Plus when they said individuals still employed !! Wasn't the whole point opposite?  The unemployed should get the opportunity first above all.

Plus according to Google only 36% of the people in the whole US have retirement plans up and about. I cannot understand who drafted this law in what state.

[Coyster]

Plus when they said individuals still employed !! Wasn't the whole point opposite?  The unemployed should get the opportunity first above all.

One has to be employed or at least self employed to have a retirement plan, it's not an opportunity (free money) of any sort, it's just the payment an ex worker receives after they have retired and no longer working, so a worker must have either served the government or maybe a private firm to be on a retirement plan when retired.

I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

It's up to the workers who are taking fractions out of their retirement plan, the government is only trying to relieve them of some burden caused by the pandemic. If they want to meet basic needs are are only taking out a little, then there is nothing wrong with that, but any worker taking a considerably large portion of their retirement plan should have an investment they want to put it into. It is what it is, when you take your retirement benefits doesn't matter, it's what you do with it; some retired workers have earned their retirement benefits at the appropriate time and still squandered it, anyone who's withdrawing from this plan now and is smart will have no problems in the future.

[Lucius]

I find this offer very attractive and I would personally take advantage of it if I had the opportunity to do so. I see the reasons in the fact that a lot of people work all their lives (40+ years), then retire at, say, 65 years of age. If we look at the average life expectancy of people in the USA, it is around 79, which is not so bad - but if someone empties their pension fund at the age of 60 and lives for at least another 20 years, they could find themselves in serious financial trouble.

I personally know a lot of people who haven't even experienced their retirement, or have only enjoyed it for a few years - so if someone offered a 60-year-old to take as much as $100 000 at once, here in Europe it would surely be done by more than 2/3 of people.

The pension system is seriously compromised, especially in countries where there is depopulation and large-scale emigration - because if there are no workers, then there is no one to finance pensions or they are so low that they cannot meet even basic living needs.

[Gozie51]

I find this offer very attractive and I would personally take advantage of it if I had the opportunity to do so. I see the reasons in the fact that a lot of people work all their lives (40+ years), then retire at, say, 65 years of age. If we look at the average life expectancy of people in the USA, it is around 79, which is not so bad - but if someone empties their pension fund at the age of 60 and lives for at least another 20 years, they could find themselves in serious financial trouble.

I personally know a lot of people who haven't even experienced their retirement, or have only enjoyed it for a few years - so if someone offered a 60-year-old to take as much as $100 000 at once, here in Europe it would surely be done by more than 2/3 of people.

I would want to view this from an angle of being prudent in the person. If someone is good with managing finances,cthen that will not be a problem if they take out their money from pension. That can help better if they reinvest the money especially in a capitalist system that allows individual establishment. I don't see any problem if someone work for like 15yearsand decide to resign or retire to establish a business.

In some countries, if you have worked in government for 15years, you are entitled to resign and your entitlement will be paid to you. Is better to resign while young like 55 - 60years so you can have energy you can use for other endeavour.

[jaysabi]

For those of you not familiar with the Cares Act, here is a good guideline of everything that's involved- https://home.treasury.gov/policy-issues/cares

I work in the finance industry and in particular with retirement plans.  The cares act allows for individuals still employed and under 59.5 years of age to take withdraws from their retirement plans, up to $100,000, as well without the normal 10% penalty.  I am constantly getting calls from clients who are utilizing this feature.  In theory it's a good thing for those whom have encountered hardships due to Covid-19, however many are taking advantage of this and simply taking out money just because they can.  

I foresee serious problems down the road with so many dipping in to their retirement, many of which are depleting their entire accounts.  The question I ask myself and everyone else..what are all the negatives consequences likely to come from this?  I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

Americans already don't save enough for retirement in general. Social security isn't designed for people to survive on alone, it's supposed to supplement your own savings and in the worst case, keep people out of abject poverty when they didn't save enough themselves. People depleting retirement savings before retirement for any reason will increase the number of people who are relying mainly or entirely on social security in the future. And the money taken out won't just be a dollar for dollar amount they're down in the future because they'll be missing out on compounded gains over time. 

[Darker45]

For those of you not familiar with the Cares Act, here is a good guideline of everything that's involved- https://home.treasury.gov/policy-issues/cares

I work in the finance industry and in particular with retirement plans.  The cares act allows for individuals still employed and under 59.5 years of age to take withdraws from their retirement plans, up to $100,000, as well without the normal 10% penalty.  I am constantly getting calls from clients who are utilizing this feature.  In theory it's a good thing for those whom have encountered hardships due to Covid-19, however many are taking advantage of this and simply taking out money just because they can.  

I foresee serious problems down the road with so many dipping in to their retirement, many of which are depleting their entire accounts.  The question I ask myself and everyone else..what are all the negatives consequences likely to come from this?  I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

Is this feature of the Cares Act granted to literally everyone who asks for it? Or is there some kind of justification required or perhaps a set of requirements to be complied with to be able to avail of it? If this is granted to just everyone who wishes to withdraw from their retirement plans, this could indeed pose a certain problem in the future. I'm not saying people are irresponsible of their future but, yes, they could be at times.

It is their money, yes, but if the retirement plan system is this loose it might really offer itself to abuse, and the burden will fall to the government in the long run. Well, I can only hope that the US economy will thrive in the future so that they could absorb the possible impact of this.

[exstasie]

For those of you not familiar with the Cares Act, here is a good guideline of everything that's involved- https://home.treasury.gov/policy-issues/cares

I work in the finance industry and in particular with retirement plans.  The cares act allows for individuals still employed and under 59.5 years of age to take withdraws from their retirement plans, up to $100,000, as well without the normal 10% penalty.  I am constantly getting calls from clients who are utilizing this feature.  In theory it's a good thing for those whom have encountered hardships due to Covid-19, however many are taking advantage of this and simply taking out money just because they can.

I foresee serious problems down the road with so many dipping in to their retirement, many of which are depleting their entire accounts.  The question I ask myself and everyone else..what are all the negatives consequences likely to come from this?  I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

Considering people generally get an employer match on contributions, this is a pretty sweet deal. I'm not surprised people are taking advantage of the ability to cash out without penalty.

How many of these people do you think are taking out the cash and hoarding it, or using it as working capital in a business? Vs. the number who are simply burning through their retirement savings to pay day-to-day expenses? That makes a big difference.

When I was transitioning into self employment some years ago, I cashed out my retirement account (with penalty) to put the capital towards my business. It ended up being a great decision, and I've since rebuilt my portfolio.

[Findingnemo]

For those of you not familiar with the Cares Act, here is a good guideline of everything that's involved- https://home.treasury.gov/policy-issues/cares

I work in the finance industry and in particular with retirement plans.  The cares act allows for individuals still employed and under 59.5 years of age to take withdraws from their retirement plans, up to $100,000, as well without the normal 10% penalty.  I am constantly getting calls from clients who are utilizing this feature.  In theory it's a good thing for those whom have encountered hardships due to Covid-19, however many are taking advantage of this and simply taking out money just because they can.  

I foresee serious problems down the road with so many dipping in to their retirement, many of which are depleting their entire accounts.  The question I ask myself and everyone else..what are all the negatives consequences likely to come from this?  I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

From Individual's perspective it is not really that bad, they need money badly for their survival or they simply taking the advantage of the condition so they can use that money into something productive which can give more money than those retirement plans.And I guess lot of them heard about investing due to covid 19 that is why some people trying to become an investor.

[Yatsan]

For those of you not familiar with the Cares Act, here is a good guideline of everything that's involved- https://home.treasury.gov/policy-issues/cares

I work in the finance industry and in particular with retirement plans.  The cares act allows for individuals still employed and under 59.5 years of age to take withdraws from their retirement plans, up to $100,000, as well without the normal 10% penalty.  I am constantly getting calls from clients who are utilizing this feature.  In theory it's a good thing for those whom have encountered hardships due to Covid-19, however many are taking advantage of this and simply taking out money just because they can.  

I foresee serious problems down the road with so many dipping in to their retirement, many of which are depleting their entire accounts.  The question I ask myself and everyone else..what are all the negatives consequences likely to come from this?  I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

I see this Cares Act as a good savior of the people undergoing hardship most specially at this time of pandemic for they can withdraw funds from their retirement plan for the sake of surviving the effect of this pandemic that most are out of job and do not have any other sources of income duly because they were temporarily out of their jobs maybe because remote working won't work on the type of job they have. I think there is nothing wrong with that for they have worked out for it ever since they started working it is just they will be accessing their retirement plan too early than supposed day of usage. There will be no issue in that as long as this Care Act won't be abused that I guess won't happen for we do have certain decent reasons why we need to access our retirement plans if we do have such one because it is our money after all.

[ChiBitCTy]

I foresee serious problems down the road with so many dipping in to their retirement, many of which are depleting their entire accounts.  The question I ask myself and everyone else..what are all the negatives consequences likely to come from this?  I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

For us to understand the effect it may have, I think we would need to get information on how many people are actually taking the offer, their average age and if they actually need the aid at the time; a 29 year old liquidating their retirement savings can make up that back with more years of work ahead of them and would not be as dependent on the government after retirement as a 45+ year old in the same situation.
Also, one who is currently at a crisis financially would benefit from the scheme to keep a business afloat or provide basic needs.

There is a slim chance that those withdrawing without actually needing the cash at the time are doing so to put that cash in some other investment which they think would be more profitable at the time they are fit for retirement. That would be a huge gamble.

You'e exactly right.  From my own personal experience the age range has varied quite a bit .  I see mostly people in their 40's and 50's but I have also seen plenty of those in their 20's and 30's taking advantage of this as well.  Even if it was just older people or just younger people taking advantage of this Act, I think there is still a whole lot to be worried about down the line whether sooner or later.

[ChiBitCTy]

For those of you not familiar with the Cares Act, here is a good guideline of everything that's involved- https://home.treasury.gov/policy-issues/cares

I work in the finance industry and in particular with retirement plans.  The cares act allows for individuals still employed and under 59.5 years of age to take withdraws from their retirement plans, up to $100,000, as well without the normal 10% penalty.  I am constantly getting calls from clients who are utilizing this feature.  In theory it's a good thing for those whom have encountered hardships due to Covid-19, however many are taking advantage of this and simply taking out money just because they can.  

I foresee serious problems down the road with so many dipping in to their retirement, many of which are depleting their entire accounts.  The question I ask myself and everyone else..what are all the negatives consequences likely to come from this?  I think there will be all sorts of issues in terms of social security, homelessness, reliance on government assistance etc.

From Individual's perspective it is not really that bad, they need money badly for their survival or they simply taking the advantage of the condition so they can use that money into something productive which can give more money than those retirement plans.And I guess lot of them heard about investing due to covid 19 that is why some people trying to become an investor.

No this is not what's happening.  First off funding your retirement plan is often the first place anyone should be investing.  Many group retirement plans ( 401k's, 457's, 403b's etc) offer a match of some sort ( free money ) as well as discounted mutual fund options.  So taking money out of your plan is often not a good idea.  I can also guarantee that the percentage of people who are using this money for investing elsewhere is likely somewhere around .001%.  People are taking this money often for no good reason other than they can.  This is a terrible thing for Americas economy. 

[exstasie]

First off funding your retirement plan is often the first place anyone should be investing.  Many group retirement plans ( 401k's, 457's, 403b's etc) offer a match of some sort ( free money ) as well as discounted mutual fund options.  So taking money out of your plan is often not a good idea.

401K contributions get matched when you make them. It's not like you lose that money just for withdrawing early, assuming you're vested. If you're not vested then we're not talking about very much money anyway.

The penalty hurts but in this case there is no penalty.

I can also guarantee that the percentage of people who are using this money for investing elsewhere is likely somewhere around .001%.  People are taking this money often for no good reason other than they can.

It's a minority but .001% is an exaggeration. A lot of people don't have adequate startup capital, and the early withdrawal penalty is normally a huge disincentive from tapping retirement accounts. Now they can take their capital (plus employer match) penalty free and put it towards something productive.

I bet most people are just hoarding the cash based on all the fearmongering about economic collapse. Probably not the end of the world.

[hugeblack]

 The cares act allows for individuals still employed and under 59.5 years of age to take withdraws from their retirement plans, up to $100,000, as well without the normal 10% penalty.  I am constantly getting calls from clients who are utilizing this feature.

It is strange that such a law exists. In my country, you are not entitled to take from retirement money until after the end of your service period, and the return will be reward if you want to live a normal life with a minimum level of luxury for the rest of your life.

Governments should add to individuals training workshops to learn new ways of investing and learning instead of having all the things on their asset list being salary, retirement money.
The impact will be significant on individuals, but I do not expect many people to risk withdrawing a lot of money.

[Lucius]

It is strange that such a law exists. In my country, you are not entitled to take from retirement money until after the end of your service period, and the return will be reward if you want to live a normal life with a minimum level of luxury for the rest of your life.

Well, for those of us who are not from the US, this is definitely something unusual - because in my country there are pension funds that are designed for mandatory and voluntary payment - and the one who pays into such funds can not get those funds in any other way than to go to pension and to receive a certain amount each month. The exception is a voluntary fund in which the insured person is entitled to 15% of the funds only when he/she reaches the age of 55.

In the event that a person dies after paying his or her entire life into pension funds, that money is not paid to anyone - except in exceptional cases when the pension is inherited by a spouse or child who for some reason cannot support himself. I personally like the choice that is given by Cares Act, but I would introduce mandatory counseling for anyone who wants to do it, because I believe that some are not fully aware of the implications of this act.

[AicecreaME]

<...>

I think up to $100,000 withdrawal from their retirement plan is a great deal for those who need the money especially now we’re in the middle of pandemic.

Those people who tend to withdraw and are utilizing the said offer, i believe are smart enough to know what to do with their money and where to spend it over. They managed to put up with such savings for their future, hence i assume they have the ability to spend and use it wisely. Maybe those people especially the ones who belong to younger age bracket are withdrawing to invest their money to some kind of asset that will generate them an additional income. These people are wise because they’re making their money work for them while doing the bare minimum.

On the other hand, maybe some are withdrawing  just because they are really at the edge and they badly needed the money. We can’t blame these people since in the first place that’s their retirement plan. They can always use the policies to their advantage since they own the money. We’re all having a hard time and maybe they’re at worse position than we are now, leading them to withdraw what they saved up for their future.

I think it still depends on the person himself on how he would manage his savings. These people utilizing the cares acts program can either go homeless or have comfortable life in the future based on how they would use the money they have withdrawn from the plan. After all, we can’t dictate them. We can only give advice and guide them.

[ChiBitCTy]

First off funding your retirement plan is often the first place anyone should be investing.  Many group retirement plans ( 401k's, 457's, 403b's etc) offer a match of some sort ( free money ) as well as discounted mutual fund options.  So taking money out of your plan is often not a good idea.

401K contributions get matched when you make them. It's not like you lose that money just for withdrawing early, assuming you're vested. If you're not vested then we're not talking about very much money anyway.

The penalty hurts but in this case there is no penalty.

Not sure what your point is by this.  I agree, this is true.  It doesn't take away from the fact that everyone who has a 401k or other group retirement plan, should be contributing as much as they can, at least to the company match, if you can afford to do so.  

It's a minority but .001% is an exaggeration. A lot of people don't have adequate startup capital, and the early withdrawal penalty is normally a huge disincentive from tapping retirement accounts. Now they can take their capital (plus employer match) penalty free and put it towards something productive.

I bet most people are just hoarding the cash based on all the fearmongering about economic collapse. Probably not the end of the world.

Of course that was a bit of an exaggeration, but likely not but a ton.  Are you someone who works in the financial industry who's taking these requests daily, who actually speaks with tons of people doing so, where you are being told by most what they plan on doing with the money? Trust me people for some reason love to give you the reason for account withdraws when doing so, I'll never understand why but they offer up that info all the time.  

If you're saying that investing in the stock markets is not productive then you don't know history very well.  

[ChiBitCTy]

<...>

I think up to $100,000 withdrawal from their retirement plan is a great deal for those who need the money especially now we’re in the middle of pandemic.

Those people who tend to withdraw and are utilizing the said offer, i believe are smart enough to know what to do with their money and where to spend it over. They managed to put up with such savings for their future, hence i assume they have the ability to spend and use it wisely. Maybe those people especially the ones who belong to younger age bracket are withdrawing to invest their money to some kind of asset that will generate them an additional income. These people are wise because they’re making their money work for them while doing the bare minimum.

On the other hand, maybe some are withdrawing  just because they are really at the edge and they badly needed the money. We can’t blame these people since in the first place that’s their retirement plan. They can always use the policies to their advantage since they own the money. We’re all having a hard time and maybe they’re at worse position than we are now, leading them to withdraw what they saved up for their future.

I think it still depends on the person himself on how he would manage his savings. These people utilizing the cares acts program can either go homeless or have comfortable life in the future based on how they would use the money they have withdrawn from the plan. After all, we can’t dictate them. We can only give advice and guide them.

I mean this in all due respect but you couldn't be further off.  Unfortunately people overall are not that intelligent, have a lack of proper schooling and parenting and this tends to effect them for their entire lives.  I've worked in the financial field for over a decade now and one thing I've come to realize that is without question an absolute fact and that is people overall have no idea how to manage money properly.  I wish your positive outlook were the case, but it's simply the furthest thing from.

Don't take my word for it, there's plenty of statistics out there on the google machine.  For example - https://www.cheatsheet.com/money-career/10-retirement-statistics-will-scare-crap.html/