Relaxed Emergency 401(k) Withdrawal Rules Finalized by IRS

The Trump administration has made it easier for cash-strapped taxpayers to prematurely dip into retirement savings in order to “satisfy an immediate and heavy financial need.”

The Treasury Department on Sept. 19 issued final regulations governing penalty-free hardship distributions from tax-preferred 401(k)s and 403(b)s by account holders stunned by sudden financial losses. Until recently, tax-free withdrawals for those in dire need were typically reserved for individuals struggling to cover housing payments, medical bills, higher education costs, or funeral expenses.

The modified rules, which build on proposals put forth last fall, limit the emergency-related relief to account holders “who lived ...