Millions of Americans are desperate for financial relief in the wake of COVID-19. Thankfully, lawmakers recognized that back in March by implementing the CARES (Coronavirus Aid, Relief, and Economic Security) Act.

The CARES Act has a number of provisions to help struggling Americans right now. That $1,200 stimulus payment you keep hearing about or may have already received? That's part of it. The CARES Act also raised unemployment benefits and made forgivable loans available to small businesses grappling with payroll concerns. And it made one very significant change with regard to retirement savings plans like IRAs and 401(k)s.

Man at laptop holding his head


Generally, if you remove money from an IRA or 401(k) prior to reaching age 59 1/2, you're hit with a 10% early withdrawal penalty unless you happen to qualify for an exception (IRAs, for example, allow you to take early withdrawals to pay for college). Thanks to the CARES Act, you can now withdraw up to $100,000 from an IRA or 401(k) penalty-free if you've been impacted by COVID-19 and need the money.

But while that option may seem like a lifeline, the reality is that it's off the table for many Americans for one simple reason: They don't have $100,000 in retirement savings to begin with.

Workers are behind in the savings department

Americans as a whole have a lot of catching up to do on the retirement savings front. As of the end of 2020's first quarter, the average IRA balance was $98,900, reports Fidelity. For 401(k)s, the average balance was $91,400.

Now let's clarify a few things about these numbers. First, retirement portfolios are generally down due to COVID-19's battering of the stock market earlier this year. Prior to the crisis, the average IRA balance was $115,400, while the average 401(k) balance was $112,300. In other words, retirement savers are looking at serious losses right now, at least on paper or on screen, so the fact that average balances are below $100,000 isn't necessarily a function of poor saving habits but rather, the toll of the pandemic on the stock market.

Furthermore, while a balance of $98,900 or $91,400 is far from great for someone in their 40s, 50s, or 60s, for a 20-something worker, it's pretty impressive. As such, these numbers should be taken with a grain of salt.

Still, even before the crisis, most Americans barely had more than $100,000 in retirement savings to work with. Many must pledge to catch up once the economy opens back up, jobs become more stable, and the overall situation improves.

Though some people neglect their long-term savings unintentionally -- they're low- to middle-income earners who genuinely can't afford to save -- others mismanage their money or plan to fall back on Social Security -- a dangerous mistake, especially with benefit cuts on the table. But the reality is that saving independently is the best way to secure a comfortable retirement, so those in the middle or latter stages of their careers who haven't reached the $100,000 mark should aim to do better once that becomes feasible.

Meanwhile, those whose retirement accounts took a dive in this year's first quarter shouldn't stress. There's a strong likelihood that values will come back up as the stock market gets a chance to rebound and the COVID-19 crisis comes to an end.

As for those who are thinking of tapping their IRAs or 401(k)s early, well, that's just not advisable. Money removed today is money that can't be invested for added growth and won't be available during retirement.

Early withdrawals may be necessary for some people whose financial circumstances have truly taken a turn for the dire, but they shouldn't be the default option during the crisis, by any means.