Typical 401 (k) saver withdrew $ 12,000 during coronavirus: Vanguard

Retired savers appear to be taking advantage of the relaxed rules for 401 (k) withdrawals during the coronavirus pandemic.

The typical 401 (k) investor withdrew $ 12,000 from their account as a “coronavirus-related distribution,” according to new Vanguard analysis of their customer data.

This number represents the median withdrawal – in other words, the amount right in the middle of all withdrawal amounts.

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Coronavirus-related distributions are a new type of retirement withdrawal, enacted in March by the federal CARES law to help cash-strapped people during the economic recession.

About 4.5% of investors in Vanguard 401 (k) took a coronavirus distribution between March and September, indicating that few participants used the remedy, according to Vanguard analysis.

However, that equates to nearly 187,000 investors, according to a CNBC analysis of Vanguard data released over the summer, which indicated that a coronavirus distribution was available for around 4.2 million 401 (k) customers.

It’s also more than double the withdrawal rate through the end of May, when less than 2% of Vanguard 401 (k) investors had used the withdrawal mechanism, according to company data.

This suggests that more and more people turned to this CARES law safety valve as the recession continued and other temporary financial relief measures provided for by law, like one-time stimulus checks and improved unemployment benefits have ended.

The CARES Act allowed investors to withdraw up to $ 100,000 from 401 (k) plans, individual retirement accounts and other types of accounts, until December 30 in the form of a coronavirus-related distribution. Investors do not have to pay a penalty tax for withdrawing early from retirement funds and are given flexibility in paying income tax.

The typical amount withdrawn has increased slightly since May, from approximately $ 10,400 to $ 12,000.

In May, the typical investor withdrew more than half of their 401 (k) savings in the form of a coronavirus distribution, according to earlier Vanguard analysis.