n the past, there were a few ways you could avoid penalties. Congress recently added several more, and some of those exceptions allow you to repay the money within three years.
right now, while others take effect in coming years, says David Certner, legislative counsel for AARP. The exceptions also can apply to workplace plans, such as 401s or 403s, but it may require your employer to opt in, so check with your human resources department, Certner says.
Another potentially large exemption with the repayment option is one for terminal illness. Effective this year, the 10% penalty is waived for people whose doctor certifies that they are expected to die within seven years, says Itkoe, who’s also a certified public accountant serving on the American Institute of CPAs’ personal financial planning executive committee. There’s no limit on how much can be withdrawn.
Also effective next year is a penalty-free distribution of up to $1,000 for some emergency expenses. People can take one such withdrawal per year if the money is repaid. Otherwise, only one distribution is allowed every three years. Secure 2.0 also expanded the “public safety employee” exception for early withdrawals from workplace plans.
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