Most financial advisers recoil at the idea of taking a withdrawal from your 401(k) “early”—before age 59½. An early cash withdrawal—as opposed to taking a loan from your account—typically triggers a 10% tax penalty.
But last year, Congress allowed people affected by Covid to take early withdrawals from 401(k)s and IRAs—up to $100,000—without that 10% penalty.
And that raised the question: Should such withdrawals always be easier? After all, tapping such retirement accounts can be a lifesaver when someone needs the cash, rather than turning to other sources, such as credit-card debt.
In February, two experts argued the case for each side in the Investing in Funds & ETFs report. Norbert J. Michel, director of the Heritage Foundation’s Center for Data Analysis, argued that people should control their own money, not Congress, and that the 10% penalty should be waived permanently. Olivia S. Mitchell, director of the Pension Research Council at the Wharton School of the University of Pennsylvania, wrote that early withdrawals are financially damaging.
The debate prompted all sorts of comments from readers, on both sides. Here are edited excerpts of some of the responses: