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Many applauded the recent CARES Act retirement provisions allowing employers to let employees borrow or withdraw more from their retirement plans. But others were, if not alarmed by workers going for the gusto and grabbing their funds, concerned.

Did offering the ability to take more loans require (morally or otherwise) an employer to provide some information about potential consequences? Would employees be hurting themselves more by taking advantage of the provisions? Would plans be drained by summer?

Principal Financial Group has attempted to shed some light on what actions retirement plan participants have taken and think they might take. Its recent study asked workers about their likelihood of tapping retirement or other funds during this time when people are experiencing financial loss.

Overall, 30% of workers said they don't yet know if they'll have to tap into their accounts; 43% said they think they will need to tap into their accounts. These are the accounts and the percentage of the 43% who would take advantage of those funds:

• Emergency savings: 15%
• Health Savings Account: 4%
• Individual retirement account: 13%
• Retirement account: 13%
• Stocks/investments: 6%
• Other: 2%

The results, like many things reported during this tumultuous year, are of their time — in this case, spring 2020. It seems likely these numbers could change depending on what happens during the rest of 2020.

4 things plan participants should consider

Still, whether an employee is dead-set on taking out funds or still on the fence, removing retirement savings to meet financial needs now, even when absolutely necessary, is not an action to be taken lightly. Heather Winston, CFP, assistant director of advice and financial planning at Principal offered four things plan participants should consider:

1. Consider that this money is intended for an older you. "When we're talking about retirement assets, it pays to wait. It's a long-term commitment to your future self."

2. Learn about the options first. "There are always long-term implications if you distribute your savings (taxes being just one of them). Educate yourself on available options, and how each of these options can impact your nest egg."

3. Be specific in planning. "Unfortunately, none of us have a crystal ball to see the future – but you can be realistic, Focus your planning on the 'why, how, and what' to add discipline and rigor to your decision-making and goals, while removing emotion from the process, to be objective and pragmatic. Think through how much you may really need, not just what's available. Even a simple list of your 'must-haves' will give you a clearer sense of what's necessary so you can better manage through uncertainty."

4. Ask yourself some tough questions. "Are there other areas you can tap to get you through a tough time besides your retirement assets? How rapidly can you put the money back? If it's a loan, can you afford to continue deferring? Try your best to avoid the double whammy of withdrawals and stopping deferrals or IRA contributions."

People in the financial industry are aware of two big potential problems of withdrawing funds. Plan sponsors know about them too. But do participants know the potential gotchas?

2 potential gotchas about tapping a retirement plan

Part of having a retirement plan means "knowing" it's not a good thing to take money out of a  retirement plan early. Sponsors will have likely already told participants this early on. But now might be the time to reiterate for participants the possible downsides of cracking open their 401(k) or other retirement accounts:

1. If they take money out when market values are low, they could lose out on possible gains if or when the market recovers. 2. They need to remember the power of compound interest over time — the account loses that compound interest that could have been grown from the money taken from the account or from any deferrals postponed.

Conditions to be met before removing funds

If a participant decides to tap into retirement funds, there are still conditions to be met, assuming their employer has even offered the CARES Act provisions as options. It's not as simple as it appears, as Principal reiterates. And what's interesting is that it's not up to the employer to tick the box certifying that the participant meets the requirements. Participants must self-certify that they meet at least one of the following:

• Diagnosed with coronavirus by a CDC-approved test
• A spouse or dependent diagnosed with coronavirus by a CDC-approved test
• They themselves have experienced harmful financial consequences resulting from COVID-caused reduction in work hours, layoff, furlough, quarantine, or can't work from home due to business closing or lack of childcare.

Of course, all of the above assumes that an employer has decided to offer the CARES Act loan provisions and coronavirus-related distribution options, that they have a plan specifically amended to indicate this, and that it's an eligible plan such as 401(k), 403(b) or governmental 457(b) plan.

But whether or not employers decide to offer the CARES Act provisions, participants should be informed of the impact of any loan or withdrawal on future retirement savings, Principal says.