CARY, N.C. (WTVD) -- Personal finances have become even more of a concern for many residents as businesses are closed or operating on minimum staffing.
If you're still drawing a paycheck, should you keep contributing to a retirement plan? What if you're in a financial pinch and are thinking about taking a chunk out of a retirement nest egg to cover your current living expenses?
David Schawel, chief investment officer at Family Management Securities in Cary, joined ABC11 to answer these and other questions Friday evening. Watch the featured video for the full interview. A partial transcript follows.
Can you explain the differences between the Paycheck Protection Program and the Economic Injury Disaster Program?
"So, two major programs, both of them put into place by the government, the SBA department with the backing of the U.S. Treasury, really to help this unprecedented shutdown of economic activity. And with the Paycheck Protection Program, the main objective here is to keep businesses, to keep their employees on the payroll. So, obviously a further economic slide would happen if businesses started laying off employees, so the thought here is let's incentivize businesses to keep employees on the payroll, and what happens here is if the loans, if 75 percent of the loans are used for payroll expenses, it can be forgiven.
"On the other side, the Economic Injury Disaster, that's more appropriate for smaller businesses; think about businesses where maybe their fixed costs are higher than their employee costs, and in that standpoint, they can get up to $10,000 advanced that does not need to be repaid, in addition to loans that are at pretty reasonable interest rates."
Should individuals stop contributing to 401(k) or retirement accounts now?
"So, a lot of economic anxiety right now, and I think when people are thinking about their 401(k) and they see the stock market plummeting ... I think it causes a lot of individuals to get paralyzed, and they don't know what to do and it's a really scary time.
"My advice would be, and obviously everybody's individual situation is different, but if you are employed and your economic situation, financial situation hasn't changed, I would continue to contribute to your 401(k), your retirement plan especially if there's an employer match."
Schawel said it might make sense for others to stop contributing, particularly if they have mounting bills or other economic hardships.
Can you take an emergency withdrawal from a retirement account? Are there penalties right now?
"One of the new things about the CARE Act, traditionally with retirement funds, 401(k), IRAs, if you withdraw those funds early, there's a penalty. They've had a new provision with this new law where you can take up to $100,000 withdrawal from your retirement funds without a penalty. And you would have to pay income tax over the course of three years. And this is not something I would recommend to anybody, but if someone is in dire financial straits ... this is an option, worst-case scenario."
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