Suze Orman 'was so upset, honest to God’ when the government made it easier to t...

It might have seemed like a good idea at the time: allowing Americans to pull from their 401(k) accounts penalty free when the COVID-19 pandemic struck.

Many people faced uncertainty when it came to their jobs and finances and the ability to dip into retirement funds provided some needed short-term stability.

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But as personal finance expert Suze Orman told Moneywise last fall, the short-term gains might not be worth it.

“I was so upset, honest to God, when the government allowed people to withdraw $100,000 from their account,” Orman said.

The author and host of the Women & Money Podcast says allowing people to take from their future selves was a big mistake that many will regret when they enter retirement.

“If you can't pay your bills while you have a paycheck coming in, how are you going to pay for those exact same bills later on in life when you no longer have a paycheck coming in?”

What happened

The CARES Act, a COVID relief law that was enacted in March of 2020, made it easier to pull money from one’s 401(k) or IRA.

It allowed people to take up to $100,000 out of their accounts and have three years to pay it back without the normal 10% early withdrawal penalty and tax payment.

For Americans who needed cash quickly, their 401(k) was a tempting well to dip into that wouldn’t have been otherwise available.

In the spring of 2020, nearly 20% of all withdrawals from 401(k)’s, between April 6 and June 26 were related to COVID, according to CNBC.

CNBC reported that at Fidelity Investments, the largest provider of 401(k) plans in the U.S., more than 700,000 people took from their 401(k) or their 403(b) plan. The median amount was about $5,000, while more than 18,000 people asked for the full $100,000 amount.