Changes To 401K’s That Minnesotans Should Know About

THE STRUGGLE IS REAL

I don't know about you, but as a society, we tend to NOT talk about financial difficulties. I'm not that person. If I'm struggling, I have to talk about it, or it eats me alive.

Whether you can talk about your financial struggles or not, they are real. There is a new law that is trying to make life a little bit easier, temporarily anyway, to use your 401k and other retirement funds to help cover financial emergencies.

Get our free mobile app

WHAT IS CONSIDERED A 'FINANCIAL EMERGENCY?'

What is considered a financial emergency? I think that is up to you to decide. Perhaps you want to pay off a credit card, so you don't have the monthly payment. Perhaps you have a major home repair or a medical emergency that's costing you money.

NEW IRS RULES & CONDITIONS

Under the new IRS rules, Americans can now withdraw up to $1,000 from their 401k without any penalty, as long as it is needed for a financial emergency. Some of the acceptable reasons include:

Medical Care
Funeral Expenses
Auto Repairs
Any other necessary emergency personal expense

ARE THERE CONSEQUENCES TO MAKING A WITHDRAWAL?

You are allowed to make one $1000 distribution per year, and the funds must be repaid within three years. You will still need to pay income tax on the withdrawal if you DON'T pay it back, and you will not be able to make an additional hardship withdrawal.

This might sound like the way to go, especially if you are in dire need, but there are some rules that you must follow:

1. You cannot take out money if it is going to leave your account balance below $1000.

2. The emergency withdrawal is optional for employer plans, which means that not everyone will be able to participate.

IS THIS PROGRAM HELPING AMERICANS?

What do you think about this new change? Do you think this will benefit those who are struggling, or will it be the start of a long hard struggle that will lead to more debt?