William Byrnes' Tax, Wealth, and Risk Intelligence

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Although IRS-approved retirement plans are intended to allow plan participants to sock away cash for retirement, some emergencies will permit a participant to withdraw plan funds prior to retirement—and there may be options to reduce or eliminate any tax due on the withdrawal.

Serving as a great reminder of the general principals of emergency distributions, the IRS recently ruled whether a qualified plan was permitted to make “unforeseeable emergency distributions” in three fact scenarios.  In the first, the plan participant wanted to take an emergency distribution to repair water damage to his home. In the second situation, the participant requested an emergency distribution to pay his nondependent son’s funeral expenses. In the third situation, the participant requested an emergency distribution to pay “accumulated credit card debt.”  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).