With the current financial turmoil, many people suddenly find themselves in financial difficulty. Unemployment claims last week soared to their highest level on record, as many businesses have been forced to close in response to the growing coronavirus (COVID-19) pandemic.

This crisis is far from over and the future is uncertain. We are likely facing several months that will strain our economy.

A Cash Crunch Approaches

Last week Congress passed a $2.2 trillion stimulus package designed to help Americans meet ends, but those $1,200 checks won’t stem the financial bleeding of most people for very long.

I advise people over and over to make sure they have enough cash in an emergency fund to last them through six months of unemployment. For those who have done this, you are in far better shape to survive the ongoing turmoil.

For those who don’t have sufficient emergency savings, which I am sure includes the vast majority of people, today let’s discuss other options.

I emphasize that these are options of last resort. They may stem the bleeding in the short term, at the trade-off of a longer term problem. But they’re worth discussing nonetheless.

Changes to Your 401k

More than half of all Americans work for a company that offers a 401k plan. In fact, there are many people who are 401k millionaires, but who lack sufficient non-retirement savings. Investors that withdraw from retirement accounts early are hit with both penalties and income taxes, creating a significant incentive not to withdraw them.

The stimulus package that was signed by President Trump last Friday makes several changes that allow investors access to some of those funds without the harsh financial penalties.

The bill would let investors of any age take up to $100,000 from retirement accounts this year without paying the 10% withdrawal penalty. Investors would avoid taxes on the withdrawal if the money is put back in the account within three years. Otherwise, the tax bill can be spread over three years.

The bill also doubles the amount of a loan that could be taken from your 401K from $50,000 to $100,000, and gives an additional year to pay back that loan. In my view this is a better option than taking a straight withdrawal, unless the size of your retirement account is already sufficient to fund your retirement.

Again, these are options that should only be used in dire circumstances. However, they are better options than defaulting on your mortgage, or running up high-interest credit card debt in order to make ends meet.

Roth IRA Withdrawals

In addition to these changes, there is another option for those who have Roth Individual Retirement Accounts (IRA) accounts. When you fund a Roth IRA, you do so with after tax dollars. Over the years, the earnings grow and can be withdrawn tax-free at retirement. But the basis (that is the after-tax contributions you used to fund the account) can be withdrawn tax-free at any time.

Thus, if you have a Roth IRA that has grown far beyond the size of the contributions you made, you can pull out the contributions without any taxes or penalties while keeping the bulk of the Roth IRA intact and growing.

These are not measures I would ordinarily endorse for investors, but these are extraordinary times. It is critical that you are saving money for retirement, but it’s even more important in these difficult times that you are able to provide for the immediate needs of you and your family.

Editor’s Note: Our colleague Robert Rapier just pinpointed a few emergency financial measures you can take to get through this coronavirus crisis. If you’re looking for additional alternatives, there’s a compelling money-making opportunity in real estate that most investors don’t even know about.

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