For years, many Americans have struggled to build emergency savings and it’s only gotten worse with inflation and high interest rates since the COVID-19 pandemic. According to Bankrate, nearly 6 in 10 U.S. adults don’t feel comfortable with their level of emergency savings, and 27% have no savings at all.
However, the IRS is now making it easier for Americans to get $1,000 when they need it in an emergency, which could be anything from unexpected medical expenses to car repairs or groceries.
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The Setting Every Community Up for Retirement Enhancement Act (SECURE) has been undergoing changes since 2023. Under the new law, those who need it can now take $1,000 out of a traditional retirement account without penalty.
The money does not have to be paid back, but if it isn’t, income tax will have to be paid on it. People can only make a withdrawal once a year, then they have three years to put the money back in order to avoid taxes.
The retirement account balance cannot fall below $1,000. So, someone with $1,500 in their retirement account can only borrow up to $500.
