Storm victims may be able to tap their 401k.
Federal lawmakers are considering a proposal to allow victims of Tropical Storms Irma and Harvey to withdraw money from their retirement accounts to rebuild their homes and lives without incurring penalties.
Rep. Kevin Brady (R-Texas) is one of several lawmakers considering introducing a bill that would tweak the current tax code to aid victims. "It will include tax provisions, some of which will help people access their retirement funds without penalty for rebuilding activities," he told reporters last Thursday.
"This won’t be boilerplate," said Brady, who's chairman of the House Ways and Means Committee. "We’re going to tailor these to our communities and their needs going forward."
People who withdraw funds from retirement accounts before they turn 59 and a half years of age typically have to pay a 10% penalty and other state and federal taxes.
Brady's office confirmed Monday that no specific bill has yet been introduced and declined to reveal more details.
Loosening tax rules on early retirement savings withdrawal is controversial because it can encourage people to use it as a means to fund bills and items that are better off paid for by other financial sources, some personal finance experts say.
Brady's comments come days after retirement account lobbyists pitched a proposal to waive financial penalties for storm victims if they withdraw funds from their individual retirement accounts (IRA) or work-sponsored 401(k) or 403(b) retirement saving accounts.
Similar retirement account-related relief provisions were granted by the Internal Revenue Service and other federal agencies to the victims of Hurricanes Katrina, Sandy and Rita.