Thinking about tapping into your retirement savings early? You’re not alone. Life happens—and sometimes, so do unexpected expenses or career changes. While retirement accounts are generally designed to stay untouched until age 59½, updates under the SECURE Act and SECURE Act 2.0 have made it easier to access funds without paying that extra 10% early withdrawal penalty—if you meet the right criteria.

At Richmond Brothers, our mission is to help you live fearlessly into and beyond retirement—and that includes helping you navigate your options confidently when life throws a curveball.

What Is the Early Withdrawal Penalty?

Normally, if you take money from an IRA, 401(k), or other qualified retirement account before turning 59½, the IRS charges a 10% early withdrawal penalty on top of your regular income tax. This can be a costly mistake—especially if you’re not aware of the available exceptions.

New Exceptions to the Penalty (from SECURE Act 2.0)

Over the last few years, Congress has added more exceptions to the list of situations that qualify for penalty-free withdrawals. These include:

• Terminal illness
• Natural disaster recovery
• Victims of domestic abuse
• Emergency personal expenses (up to $1,000 per year)
• Long-term care insurance premiums (beginning in 2026)

These new rules were designed to give people more flexibility in tough situations—but there’s a catch.

Just because you qualify doesn’t mean your plan is required to offer it. That’s where it gets tricky.

It’s Not Just About Qualifying—It’s About Doing It Right

Even if you meet the exception criteria, you could still owe the penalty if the timing or use of funds doesn’t match IRS rules. For example, some exceptions require that funds be used for a qualifying expense within the same year of the distribution. And not all retirement plans are required to adopt these new rules right away.

That’s why it’s so important to speak with a knowledgeable advisor before making any withdrawals.

A Helpful Resource from Ed Slott & Company

We’ve teamed up with our friends at Ed Slott & Company, a nationally recognized authority on retirement tax planning, to bring you a free resource:

👉 Download: “Avoiding the 10% Penalty in 5 Easy Steps”

This easy-to-follow guide explains how the new rules work and what you need to watch out for to avoid costly mistakes.

What About the One Big Beautiful Bill?

There’s been a lot of talk lately about the One Big Beautiful Bill (OBBB) and what it means for taxes in retirement. Just to clarify:
🛑 OBBB does not eliminate or change the 10% early withdrawal penalty.

Even with this new legislation in place, the rules around early access to your retirement accounts remain the same. So it’s still important to plan carefully and consult a trusted advisor before taking any action.

The Bottom Line

Retirement savings are meant for your future—but sometimes, life happens. If you’re considering tapping into your accounts early, make sure you understand all your options and how to avoid the 10% penalty.

📞 Have questions? We’d love to help. Call our office at 517-435-4040 to schedule a complimentary visit with one of our advisors.

We’re here to help you make confident, well-informed decisions—so you can enjoy the retirement you’ve worked so hard to build.