401(k) Withdrawal Penalty Rule Changes for 2024

More people are taking early emergency withdrawals from retirement savings accounts. New IRS rules might offer some relief.

emergency fund glass jar on blue color background
(Image credit: Getty Images)

If you've had to use your retirement savings for an immediate financial need, you are not alone. Data show more people are tapping into their 401(k)s and IRAs to handle financial emergencies. For instance, the Vanguard Group reported that early withdrawals from retirement accounts reached an all-time high of 3.6% last year, up from 2.8% the previous year, based on about 5 million accounts.

An early withdrawal is typically subject to ordinary income tax and a tax penalty. However, there is some good news: as of January 1 this year, changes to the retirement plan withdrawal rules have taken effect. The SECURE 2.0 Act allows penalty-free withdrawals to address personal emergencies and domestic violence.

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Kelley R. Taylor
Senior Tax Editor, Kiplinger.com

As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist.