There is a new, interest-free, penalty-free option if you need a quick $1,000.
The Internal Revenue Service has now made it easier to take a limited amount of money out of a traditional retirement account penalty-free. While previously you could tap your savings without penalty in more limited ways, and often with more paperwork, you can now take out up to $1,000 of your funds for any self-defined emergency.
The change comes after the IRS spelled out what counts as an emergency personal or family expense under a 2022 retirement law that went into effect this year. The reasons can include medical care, funeral expenses, and auto repairs, but the key phrase is the catchall, “any other necessary emergency personal expenses.”
The $1,000 provision is different from other retirement-account withdrawal options because you can just say that you have an emergency, without specifying what it is, so you can get the money faster.