Average Covid-19-related 401(k) withdrawal was $10,000: Fidelity

CNBC's senior personal finance correspondent Sharon Epperson joins the "Squawk Box" team to discuss why not many people have taken advantage of relaxed 401(k) withdrawal rules. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi Few people have taken advantage of relaxed rules offering early access to retirement savings for those facing financial hardship due to the coronavirus pandemic. Instead, most 401(k) plan participants appear to be staying the course and haven’t made significant changes to their retirement savings. Fidelity, the nation’s largest 401(k) provider, said contributions to its workplace savings plans actually increased slightly in the third quarter, despite market swings and economic uncertainty. At Fidelity, the average 401(k) balance increased to $109,600 by the end of September, a 5% increase from the second quarter and up from 4% from a year ago. Under the federal CARES Act, retirement savings plan participants who have been affected by the coronavirus have until the end of December to take up to $100,000 out of their 401(k), 403(b) or individual retirement account without paying a 10% early withdrawal penalty. However, not many have done it. About 1.3 million people — or 5.2% of participants — withdrew money from Fidelity workplace savings plans between April 1 and Oct. 31. At Vanguard, 4.5% of participants had made a 401(k) withdrawal under the CARES Act rules by the end of September. And 7% of eligible participants at T. Rowe Price have taken a coronavirus-related distribution from their 401(k). Fidelity said the average 401(k) plan withdrawal was $10,000 — a relatively small amount, but one that could eventually grow to be a significant slice of retirement income if left untouched. If you’re 35, a $10,000 nest egg could grow to nearly $100,000 by the time you’re 70, assuming a 7% annual return, according to calculations by Bankrate.com. That’s why financial advisors warn against tapping your 401(k) and putting your future financial stability at risk. “Even if it’s possible to borrow from your 401(k) or take a distribution ... consider this a last resort,” said Carrie Schwab-Pomerantz, a certified financial planner and president of the Charles Schwab Foundation. “While present circumstances may be difficult, I’d counsel anyone to avoid jeopardizing their future retirement unless absolutely necessary. “You may not appreciate the full consequences until much later.” » Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision » Subscribe to CNBC: https://cnb.cx/SubscribeCNBC » Subscribe to CNBC Classic: https://cnb.cx/SubscribeCNBCclassic Turn to CNBC TV for the latest stock market news and analysis. From market futures to live price updates CNBC is the leader in business news worldwide. The News with Shepard Smith is CNBC’s daily news podcast providing deep, non-partisan coverage and perspective on the day’s most important stories. Available to listen by 8:30pm ET / 5:30pm PT daily beginning September 30: https://www.cnbc.com/2020/09/29/the-n... Connect with CNBC News Online Get the latest news: http://www.cnbc.com/ Follow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC Follow CNBC News on Facebook: Follow CNBC News on Twitter: https://cnb.cx/FollowCNBC Follow CNBC News on Instagram: https://cnb.cx/InstagramCNBC https://www.cnbc.com/select/best-cred... #CNBC #CNBCTV