IRS makes hardship workplace retirement plan withdrawals easier for disaster victims
Saturday, September 21, 2019
Coastal and East Texas is flashing back to 2017. That year, major Hurricane Harvey devastated Houston. Many parts of Space City and the Gulf Coast are still recovering.
Now it's Tropical Storm Imelda, which now has devolved into a depression, that has dropped way too much rain on the area.
At least five people have died and the southeastern part of the Lone Star State is facing record-setting flooding.
Using nest egg to make storm repairs: As people struggle to recover, again, some will find that they need to tap retirement savings.
That's not generally a good idea, according to financial planners. I, too, have blogged about raiding of retirement savings as an absolutely final, no-other-choices move.
But sometimes real life overrides theoretical money matters.
If you do need to take a hardship withdrawal from your retirement plan, the Internal Revenue Service has just issued rules that makes these extraordinary distributions from workplace plans easier.
Forbes' retirement writer Ashlea Ebeling has the details. Her article for the magazine gets this week's Saturday Shout Out.
I'll let your read it at your leisure, but I want to note the key change as far as accessing money in a hardship situation. Ebeling writes:
The new rules add a seventh category to what automatically counts as a hardship withdrawal: disaster-related expenses of an employee who lived or worked in a federal-declared disaster area. (Note this is not as broad as prior IRS disaster-relief announcements which extended hardship withdrawals to employees taking them on behalf of relatives and dependents.)
Again, you must be facing a hardship to qualify for this withdrawal. That's defined as an immediate and heavy financial need.
But if that's the case for folks dealing with Imelda or other disasters or unexpected and dramatic circumstances, such retirement withdrawals are available.
You also might find these items of interest:
- Disaster relief provisions are part of House tax extenders bill
- IRS and other government resources can help you deal with a natural disaster
- Alert property assessors of disaster damage ASAP to avoid wrong real estate tax bill
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