Under the SECURE 2.0 Act, individuals in federally declared disaster areas can withdraw up to $22,000 from retirement accounts without the 10% early withdrawal penalty if they experience an economic loss. While the withdrawal is taxable, the tax can be spread over three years. These provisions are optional for retirement plans, but individuals may still self-report the withdrawal as a disaster distribution on their tax return using a hardship withdrawal.
For plan loans, the maximum limit during a disaster increases to $100,000 or 100% of the vested account balance (up from the usual $50,000 or 50%). To qualify, individuals must live in a federal disaster area, suffer an economic loss, and take the loan within 180 days of the disaster. Loan repayments due within 180 days may be delayed for up to one year, and the standard five-year repayment term may be extended.