Early Retirement Withdrawals Made Easier: New Rules You Need to Know

Thinking about tapping your retirement savings before 59½? Worry less, withdraw smarter. The Secure 2.0 Act unleashed over 20 early-withdrawal exemptions that can save you the 10% penalty for early withdrawals from your IRA and 401(k).

Key Takeaways:

  • Financial emergencies: Need cash for an unexpected crisis? Withdraw up to $1,000 penalty-free from your IRA or 401(k) in 2024 for financial emergencies (one withdrawal per year).
  • Roth emergency savings accounts: Access tax-free funds through new employer-sponsored Roth emergency-savings accounts ($2,500 account limit per participant).
  • Disability: Permanently disabled? Early withdrawals are allowed, but the requirements to qualify are significant.
  • Domestic abuse: Victims of domestic abuse within the past 12 months can withdraw $10,000 or 50% of their accounts, whichever is less.
  • Natural disasters: Federally declared disaster victims can now withdraw $22,000 penalty-free.
  • Terminal illness: If you're diagnosed with a terminal illness with a remaining 7-year life expectancy, you may withdraw any amount penalty-free.
  • Other IRA perks: Medical insurance for the unemployed (after 12 weeks), qualified education expenses for yourself, spouse, children or grandchildren, and first-time home purchases ($10,000 max).
  • Other 401(k) bonuses: Divorce settlements and public-safety employees (age 50 or 25 years of service) qualify for exemptions.

Check out: IRS Publication 590-B

Remember:

  • Early withdrawals are still taxed (except from Roth accounts).
  • Retirement funds are for later, use them wisely.
  • Explore all options before tapping your nest egg.

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Not investment or tax advice.