Feds Make Retirement Dollars Available In Disasters Like L.A. Fires

The IRS has issued a notice explaining how the SECURE 2.0 Act provides greater flexibility for individuals impacted by a major disaster to access their retirement savings. This guidance outlines special provisions that allow qualified disaster victims to make penalty-free withdrawals from their retirement accounts, such as IRAs and 401(k)s, to help cover emergency expenses.

By easing access to retirement funds in times of crisis, the IRS aims to support financial recovery for those affected by natural disasters or other federally recognized emergencies.

Who is eligible to draw from retirement funds?

A taxpayer may be eligible for relief that provides for expanded access to their retirement funds if their principal residence was in a major disaster area and they sustained an economic loss due to that disaster. An economic loss includes, but is not limited to:

• Being displaced from the taxpayer’s principal residence.
• Loss or damage to or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other causes.
• Lost income due to temporary or permanent layoff.

Use the tool on FEMA.gov/disaster to find a current list of major disaster declarations.

These types of disaster relief are available to people who qualify:

• May withdraw up to $22,000 from an IRA or other eligible retirement plan.
  • Amount exempt from the 10% early distribution tax.
  • May repay to a retirement plan or IRA within three years of the distribution.
  • Distribution may be included equally in income over three years.
• A retirement plan may offer increased loan limits and delay repayments.

The IRS is here to help

For questions and assistance, call the IRS disaster hotline at 866-562-5227. And be sure to keep in touch with your legal, financial, and insurance advisors to make sure you’re getting all the help you’re entitled to.

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Bridget Mackay

Bridget has been practicing law for over 25 years. After graduating from Santa Clara Law, she spent 10 years as a Deputy District attorney in both Solano and Sonoma Counties. After the birth of her daughter, her priorities changed, and she began a practice in estate planning and Medi-Cal benefits planning. This transition was a natural fit and all her skills of listening, compassion and fearless pursuit on behalf of her clients translated well to this area of law. She lives in Petaluma with her daughter and Australian Shepherd, Joey. Read More!

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