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Coronavirus-Related 401k/457b Withdrawals

Updated: Apr 24, 2020



You now have a once-in-a-career opportunity to reposition your 401k/457b account & simultaneously help yourself financially with Coronavirus. But first, some disclosures:


1st Disclosure: Right off the bat I want to say that I am absolutely not a financial advisor, CPA or attorney. I am a Commercial Multifamily Investor. What I'm about to say should be 100% researched yourself and I highly recommend you consult with your own advisor before taking any action.

2nd Disclosure: If you decide to consider taking advantage of the opportunity, I would seriously think about your personal reasons for wanting to reposition up to $100k of your 457b plan. If your plan is to just buy stuff you don't need...then you're going to hurt yourself in the long term. DON'T do that is my advice.

3rd Disclosure: There are requirements you must meet in order to legally take advantage of the Coronavirus CARES Act withdrawal. The qualification criteria is relatively loose and open to interpretation. Here is a brief list below, keep in mind plan sponsors have been advised to rely on the employee's determination of eligibility.


  • You contracted Coronavirus

  • Your spouse or dependent contracted Coronavirus

  • You were quarantined.

  • You were laid off or furloughed.

  • Your work hours were reduced.

  • You were unable to work due to lack of child care.

  • You had to close or reduce working hours for the business you own or operate.

  • You experienced adverse financial consequences.

  • Other factors as determined by the Secretary of the Treasury.

So there it is, if you believe you qualify under one of the above reasons, you are eligible to withdraw up to $100,000 of vested 401k/457b funds without penalty. The spirit of the act is to provide an option to relieve some of the financial burdens from the virus. If you have burned through some cash, you might want to backfill that cash with 401k/457b funds.


Here are some details:

  • Can make a penalty-free withdrawal up to $100k

  • If you decide to pay it back over 3 years, you won’t owe taxes. (basically a tax-free, interest-free loan)

  • You can go ahead and pay the taxes and keep the money (not a big deal since you would owe the taxes at retirement anyways).


Some reasons you might want to do this:

  1. Help with Coronavirus expenses

  2. Regain control over that money

  3. Reduce fees associated with paying the 401k/457b management fees (10’s of thousands of dollars over a career)

  4. Invest in a better investment vehicle not available in your 457b plan


Even if you pulled that money and immediately put it in an etrade account with low-fee index funds…you would save 10’s of thousands in fees over your career. You're not losing money from 'selling low' since you've immediately placed them back into the market. And if at any point you needed that money for whatever it was…it’s there and available to you...unlike a 401k/457b plan. The last thing I am suggesting is you pull that money to buy a new truck or spend it frivolously. Do NOT do that. What I AM saying is that our 401k/457b plans don't allow ANY rollovers for as long as you’re employed – this is a once in a lifetime opportunity to regain control without paying a penalty. Huge.


If you're interested in learning more about reasons you might want to do this, check out this Kiyosaki video:


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