In addition to the existing penalty exceptions, the SECURE 2.0 Act, effective December 29, 2022, introduces new exceptions to the 10% early withdrawal penalty from retirement accounts. As a result, these changes increase flexibility for accessing funds, especially during hardships or emergencies.

6 New Exceptions Overview

1. Public Safety Employees: The age 50 penalty exception expands for these employees. It now includes private sector firefighters over 50, public safety workers under 50 with 25 years of service, and state or local corrections officers and forensic personnel. From 2027, disabled first responders like law enforcement officers, firefighters, paramedics, and emergency medical personnel can get gross income exclusions post-retirement.

2. Domestic Abuse Victims: Starting in 2024, 401(k), 403(b), and governmental 457(b) plan participants who are domestic abuse victims can withdraw funds penalty-free. The limit is $10,000 or 50% of the vested account balance, whichever is less, within a year of the abuse. Self-certification for eligibility is allowed.

3. Terminally Ill Employees: Distributions to terminally ill employees are penalty-free. This applies if death is expected within 84 months, as certified by a physician.

4. Federally Declared Disasters: Withdrawals made within 180 days of a declared disaster are exempt from the 10% penalty. This applies if the participant’s primary residence is in the disaster area and they have suffered an economic loss.

5. Financial Emergencies: From 2024, up to $1,000 can be withdrawn annually from retirement plans for urgent financial needs. This is allowed if prior distributions are repaid or if subsequent contributions match the withdrawal amount. Another withdrawal is possible after three years if these conditions aren’t met.

6. Emergency Savings Accounts: SECURE 2.0 allows emergency savings accounts in 401(k) and 403(b) plans for non-highly compensated participants. The maximum balance is $2,500, though sponsors may set lower limits.


Because these exceptions offer relief from the early withdrawal penalty, you may be tempted to think there is an exception to income tax.  That is not the case.  It’s important to consider tax implications and consult a financial advisor or tax professional. For all your self-directed retirement questions, contact