Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, but our reporting and recommendations are always independent and objective.The CARES Act enables people to take early retirement distributions without paying the usual 10% penalty. Financial experts generally advise against taking money out of your retirement accounts early. Most say it should be a last resort.The government’s decision to relax the withdrawal rules shows how bad things could get, or already are, for many Americans.SmartAsset’s free tool can find a financial planner to help you take control of your money »It’s been just over a week since President Donald Trump signed the CARES Act, providing over $2 trillion in financial relief to workers and businesses in the wake of the coronavirus pandemic. In addition to sending non-taxable cash payments of up to $1,200 to qualifying Americans and expanding unemployment insurance, the bill deploys a few other financial lifelines to hard-hit workers.”Congress is giving us a lot of tools to help fight the financial challenges associated with COVID-19. This is good news,” Megan Gorman, managing partner at Chequers Financial Management in San Francisco, told Business Insider in an email.”However,” she added, “just because we have the tools doesn’t mean we should use them.”The relief bill waives penalties on up to $100,000 of retirement plan distributionsThere’s a provision in the relief bill that allows investors to take penalty-free distributions from IRAs and qualified retirement plans, like a workplace 401(k), up to $100,000. Usually any nonqualified early withdrawal — money taken out before you turn 59.5, except in the event of death or disability — is subject to a penalty equal to 10% of the distribution amount. The relief bill waives that penalty.The no-penalty allowance applies to “coronavirus-related distributions” — i.e. people who are diagnosed with COVID-19 or have experienced financial hardship from quarantine, layoffs, reduced hours, or furlough between now and December 31, 2020. It also includes people who are unable to work due to lack of childcare or business owners who can’t operate right now.Distributions will still be included in gross income and subject to regular income tax, but the bill allows the money to be spread out and claimed on your tax return over three years, so it’s not taxed all at once. You can also repay the entire distribution amount within three years back into your retirement plan and recoup any taxes you paid, according to the bill.The relaxed rules show how bleak the current situation isWhile the loosened rules may be helpful for freeing up cash for anyone with savings to pull from, they show how bleak the current situation is.Financial experts generally advise against dipping into your retirement accounts early. Even if it’s comparatively cheaper to pull from a retirement account right now, an early withdrawal reduces your balance and diminishes future earning potential, and you’ll pay taxes. Even in times of crisis, there may be a better option.”To some degree, accessing funds from your IRA or retirement plan should be the plan of last resort,” Gorman said. “Retirement funds are for your life in the future. Only if things are dire should you touch it.”But, Gorman said, some Americans have already reached that proverbial boiling point. Almost 10 million people filed for unemployment over two weeks in March. The Economic Policy Institute estimates that nearly 20 million American workers could lose their jobs by July.While Meghan Murphy, vice president of Fidelity Investments, one of the largest retirement plan providers in the US, told Bloomberg that the company expects cash-strapped workers to tap their accounts during these “unprecedented times,” an executive from Schwab said he’s “not concerned.””We’ve never experienced that in the past,” Nathan Voris, senior managing director for Schwab Retirement Plan Services, told Bloomberg.Budget out the next 6 months before making any quick decisions”The best advice in determining if you should take a [retirement] distribution is to take the time to build out a budget for the next three to six months to see if you will have enough income coming in cover your living expenses,” Gorman said.”If you find that you are unable to cover your costs, even with the stimulus payment, you should consider taking advantage of this. But you should look at all other sources of income to see if this makes sense,” she said.Another option may be taking a loan from your retirement plan. The relief bill increased the maximum loan amount from $50,00 to $100,000. There are no penalties associated with loans, but borrowers typically have five years to repay it — with payments beginning next year — or the amount will be treated as a distribution and taxed.Gorman suggests working with a tax professional or financial planner to examine the benefits and pitfalls of pulling from your retirement accounts before making a snap decision.”These are complex and nuanced issues and you need to go in with eyes wide open. Further, during crisis, judgement can get cloudy. It would be good to have someone who can help think through these issues,” she said.Read more on managing your money in this tumultuous time:3 options for people struggling to pay their mortgage during the global health crisis4 reasons to get disability insurance, even if you don’t think you need it If you’ve been financially impacted by the coronavirus, you may be able to pause payments on these 8 billsHow to get a stimulus check from the US government, which could pay up to $1,200 if you qualifyIn response to the coronavirus, credit card issuers like Amex and Capital One are letting customers skip payments without interest and more

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