Consider retirement account withdrawals
Standard personal finance advice holds that you should exhaust all other options before pulling money out of your retirement account because of the high penalties for early withdrawals and because money removed from retirement accounts is no longer compounding over time.
Still, the CARES act has provisions making it less financially onerous to pull money from your retirement accounts. Under the new law, you can take a distribution of up to $100,000 from your IRA or 401(k) without having to pay the 10% early withdrawal penalty. You’ll owe ordinary income taxes on the withdrawal, but you have 3 years to pay them or to return the money to your retirement account.
“That’s a great relief provision, especially for higher-income physicians who might have a higher 401(k) balance,” said Jamie Hopkins.
Be smart about credit cards
Although using credit cards that you can’t pay off every month is typically an expensive way to access money, getting a new card with a low or zero percent introductory rate is a short-term strategy to consider when you’ve exhausted other options. If you have good credit, you may be able to qualify for a credit card with a 0% introductory interest rate on new transactions. Pay close attention to the fine print, including the cap on the balance you can carry without interest and whether you’ll be required to make minimum payments.
The average 0% credit card offer is for 11 months, but there are some cards that can extend the offer for up to a year-and-a-half. If you choose to use this strategy, you’ll need a plan to pay off the entire balance before the introductory period ends. If there’s a balance remaining once the rate resets, you may end up owing deferred interest on it.
The financial ramifications of the coronavirus can feel overwhelming, but it’s important not to panic. While it remains unclear how long the current crisis will last, making some smart money moves to preserve your cash in the meantime can help you stay afloat.
A version of this article originally appeared on.