The North American Securities Administrators Association (NASAA), FINRA and the staff of the SEC’s Office of Investor Education and Advocacy have joined together to issue a warning to investors be careful of fraudsters targeting retirement accounts, as well as to provide a few key considerations for investors thinking of using 401(k) withdrawals or loans to purchase securities.
The CARES Act of 2020 provides significant relief for businesses and individuals affected by the COVID-19 pandemic. This includes allowing retirement investors affected by the coronavirus to gain access to up to $100,000 of their retirement savings without being subject to early withdrawal penalties and with an expanded window for paying the income tax they owe on the amounts they withdraw.
Unfortunately, unscrupulous promoters have used these CARES Act benefits to encourage investors to take money from their 401(k)s or traditional IRAs, not for current emergency financial needs, but to buy investments (often riskier ones) in an account at a firm the promoter recommends or in the investor’s existing account.
Full Advisory: COVID-19 Related Early Withdrawals from Retirement Accounts