SECURE 2.0 Act Expands Early Withdrawal Exceptions

Tax-advantaged retirement accounts such as 401(k) plans and IRAs are intended to promote long-term retirement savings and thus offer preferential tax treatment in return for a commitment to keep savings in the account until at least age 59½. Withdrawals before that age may be subject to a 10% federal income tax penalty on top of ordinary income tax. However, there is a long list of exceptions to this penalty, including several new ones added by the SECURE 2.0 Act of 2022.



Before considering these exceptions, keep in mind that the greatest penalty for early withdrawal from retirement savings could be the loss of future earnings on those savings (see chart). Even so, there are times when tapping retirement savings might be necessary.

Some employer plans allow loans that may be a better solution than an early withdrawal. If a loan or other resources are not available, these exceptions could help. They apply to both employer-sponsored plans and IRAs unless otherwise indicated.

New Exceptions

The SECURE 2.0 Act added the following exceptions to the 10% early withdrawal penalty. Withdrawals covered by these exceptions can be repaid within three years. If the repayment is made after the year of the distribution, an amended return would have to be filed to obtain a refund of any taxes paid.

  • Disaster relief — up to $22,000 for expenses related to a federally declared disaster; distributions can be included in gross income equally over three years (effective for disasters on or after January 26, 2021)
  • Terminal illness — defined as a condition that will cause death within seven years as certified by a physician (effective 2023)
  • Emergency expenses — one distribution of up to $1,000 per calendar year for personal or family emergency expenses; no further emergency distributions are allowed during the three-year repayment period unless the funds are repaid or new contributions are at least equal to the withdrawal (effective 2024)
  • Domestic abuse — the lesser of $10,000 (indexed for inflation) or 50% of the account value for an account holder who certifies that he or she has been the victim of domestic abuse during the preceding one-year period (effective 2024)

Lost Opportunity

An early retirement plan withdrawal could end up costing more than you might imagine, even without the 10% penalty. Income taxes will reduce the present value of the withdrawal, and you will lose the potential long-term growth on the amount withdrawn.

Potential lost growth on a $10,000 withdrawal, assuming 6% annual return

Potential lost growth on a $10,000 early retirement plan withdrawal, assuming 6% annual return. $10,000 now; $17,908 in 10 years; $32,071 in 20 years; $57,435 in 30 years.


This hypothetical example is used for illustrative purposes only and does not represent the performance of any specific investment. Fees and expenses are not considered and would reduce the performance shown if they were included. Rates of return will vary over time, particularly for long-term investments. Actual results will vary.


Exceptions Already in Place

These exceptions to the 10% early withdrawal penalty were in effect prior to the SECURE 2.0 Act. They cannot be repaid unless indicated.

  • Death or permanent disability of the account owner
  • A series of substantially equal periodic payments for the life of the account holder or the joint lives of the account holder and designated beneficiary
  • Unreimbursed medical expenses that exceed 7.5% of adjusted gross income
  • Up to $5,000 for expenses related to the birth or adoption of a child; can be repaid within three years
  • Distributions taken by an account holder on active military reserve duty; can be repaid up to two years after end of active duty
  • Distributions due to an IRS levy on the account
  • (IRA only) Up to $10,000 lifetime for a first-time homebuyer to buy, build, or improve a home
  • (IRA only) Health insurance premiums if unemployed
  • (IRA only) Qualified higher education expenses

Special Exceptions for Employer Accounts

The 10% penalty does not apply for distributions from an employer plan to an employee who leaves a job after age 55, or age 50 for qualified public safety employees. SECURE 2.0 extended the exception to public safety officers with at least 25 years of service with the employer sponsoring the plan, regardless of age, as well as to state and local corrections officers and private-sector firefighters.

Retirement account withdrawals can have complex tax consequences. Consult your tax professional before taking specific action.

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Matthew Englade

Matt graduated in 2008 from Southeastern Louisiana with a bachelor's degree in business. He started his career in financial services, working as a staff member with Delahaye and Associates, where he eventually became a partner.

In 2022 he formed Englade Insurance and Financial Services, where his primary focus is serving his client’s best interest. “But even if you should suffer for what is right, you are blessed.” 1 Peter 3:14

Matt is a resident of Central, LA and enjoys spending time with his wife, Angela, and three children. He also enjoys coaching middle school basketball and giving back to his local church.

Jacob Ashford

Jacob is currently a student at Southeastern Louisiana University and is studying in the College of Business as a Marketing Major.

Jacob pursues his career by working with Matt and Angela in their mission to spread financial sustainability with their current and future clients. He also donates his time to the Southeastern's College of Business by participating in numerous career services for the city of Hammond.

Having two younger sisters, Jacob understands the importance of protecting family values and leading a path to a secure future.

Nathan graduated from Texas A&M University Class of 2006 with a degree in Agriculture Leadership & Development. Nathan has been in public service as a firefighter since 2008. In addition he and Katherine have started, operated, purchased, and sold multiple small business’. Through his experiences; Financial Services has been a lifelong pursuit for Nathan and he is excited to be a resource for people like you, your family, and your business.

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Angela graduated from Southeastern Louisiana University with a Bachelor of Science degree in Nursing. She worked as a Labor and Delivery nurse for 14 years. She decided to continue her love for caring for others through helping people obtain financial health and wellness.

She joined Englade Insurance and Financial Services to guide Matt's clients on becoming aware of potential roadblocks and achieve financial peace of mind. In her free time, she enjoys spending time with her family and exercising.

Along with Matthew, she volunteers many hours to local charities to give back to the community.

Eve is happily married to her best friend Rick since 2012. They enjoy recreational trips like hiking and camping, visiting the beaches in the Gulf of Mexico, and trips to Walt Disney World. They are active in their congregation, donating their time and effort to help run the Audio/Visual presentations for services. She is grateful for all God has given her and believes all the glory goes to Him.

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