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Emergency Retirement Withdrawals for Hurricane Victims

hurricane help Sep 01, 2020


Emergency Retirement Withdrawals for Hurricane Victims


It is important to know that your 401(k), IRA and Social Security can assist you in paying for storm-related costs. Here is how.

Eligibility for the Victims of Hurricanes to Make Emergency Retirement Withdrawals

The Survivors of Hurricanes are now eligible to obtain loans and hardship distributions from 401(k) plans and other similar types of retirement accounts, thanks to relaxed IRS rules. There are several options in which retirees who haven’t received their scheduled social security payments can pick up their checks. Read along to know how your retirement savings can assist you to manage the costs of the storm.


401(k) and IRA hardship distributions: Between August 23, 2017, and January 31, 2018, Retirement savers in Texas, Florida, and Puerto Rico who were affected by the storms will be permitted to take a hardship distribution from 401(k) plans, 403(b), and 457(b) plans. This has been extended every hurricane season since, so you may be eligible.  The general rules applied to hardship distributions have been relaxed by the IRS so as to allow them to be used for additional hardship costs together with food and shelter and with fewer administrative requirements. If you are an IRA participant, you may also be permitted to receive hardship withdrawals for a need that comes up as a result of the Hurricanes in line with the new relaxed distribution rules.

As regards people who use their retirement savings to settle storm-related expenses, the standard six-month ban on new 401(k) and 403(b) contributions after a hardship withdrawal will not come to play, this ensures easy replenishment of their retirement accounts whenever they start saving again. Nevertheless, on 401(k) and FRA distributions which you take in the wake of the storm, income tax will continue to be due. And for people who are below the age of 59 1/2, they will have to pay an additional 10% early withdrawal penalty on their early distribution. For a 50-year-old worker who falls in the 25% tax bracket, who takes a $5,000 hardship distribution, will owe $1,750 in taxes and penalties on the withdrawal.

401(k) loans: if you are a 401(k) participant, you will be permitted to borrow as much as 50% of your vested account balance as high as $50,000 (which is the maximum) to settle storm recovery expenses. Generally, retirement account loans are tax-free if they are settled within five years. Nevertheless, 401(k) loans regularly charge origination, administration, and maintenance fee. Loans that are not paid back on time are regarded as withdrawals, and the outstanding loan balance could have taxes and penalties applied to it. If it happens you lose or leave the job linked to your 401(k) plan, the loan balance could become due instantly. So, not for any reason are IRA participants permitted to take loans from the account.

Assist a family member who needs your help: if you are a retirement saver, and you live outside the disaster area, you can also take a retirement account loan or hardship distribution to assist a family member or dependent who resides or works in the affected area. Rendering such assistance doesn’t stop income tax and withdrawal penalties from being applied to withdrawals used to assist storm victims.

Emergency Social Security checks: there are several options lined up by the Social Security Administration for retirees in the areas affected by the storms who need their Social Security Payments. Little disruption is expected by the SSA as regards payment issued via direct deposit. As scheduled, benefits will likewise be sent to Direct Express cards, and fees charged for using the card will be ignored for those who live in the affected areas, not considering if they still reside in the area or not. In some parts of Texas, paper checks will be delayed as a result of the temporary suspension of mail delivery service. Nevertheless, the SSA has established three emergency payment locations in Texas: the NRG Center in Houston, the Kay Bailey Hutchison Dallas Convention Center and the Toney Burger Center in Austin, where Social Security and Supplemental Security Income beneficiaries who were unable to receive their regular benefit can ask for an instant payment in person. Retirees affected by Hurricane Harvey can as well walk down to any open Social Security office and ask for an instant payment which they are entitled to.  Irma will most likely be the same, but it's too soon to tell.

Changes in rules are common following natural disasters in order to enhance faster access to Social Security and retirement savings for emergencies. Related access to retirement accounts was provided by the IRS for New Jersey and other coastal residents in the wake of Hurricane Sandy in 2012 and Louisiana flood victims in the wake of Hurricane Matthew in 2016.


We hope this information has been informative and our prayers are with the families of all the hurricane and storm victims, including our own family members.  God bless America and our territories. 




Michelle R Russell

© The Prosperity Process, LLC  

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