Can I take $1,000 out of my 401(k) without the 10% penalty?

Since January 1, 2024, SECURE 2.0 allows one emergency personal expense distribution per calendar year of up to the lesser of $1,000 or your vested balance above $1,000, free of the 10% early-withdrawal tax. It is still taxed as ordinary income, you can self-certify the emergency in writing, and you can repay it within three years. If you don't repay it, you generally can't take another emergency distribution for the next three calendar years.

Does my employer have to offer these new SECURE 2.0 options?

No. Emergency personal expense distributions, domestic abuse victim distributions, pension-linked emergency savings accounts (PLESAs), and student loan matching are all optional for employer plans. Check your plan's summary plan description or ask your plan administrator which features your plan has adopted.

What is a pension-linked emergency savings account (PLESA)?

A PLESA is an optional, after-tax (Roth) emergency savings account attached to a workplace retirement plan, available to non-highly compensated employees for plan years beginning after December 31, 2023. Employers can auto-enroll workers at up to 3% of pay, the contribution-based balance is capped at $2,600 in 2026 (it was $2,500 through 2025), withdrawals are tax- and penalty-free, and the first four withdrawals each plan year can't carry fees.

How much can a domestic abuse survivor withdraw penalty-free from a 401(k)?

Within one year of the abuse, a survivor can withdraw the lesser of 50% of the vested balance or an inflation-indexed dollar cap ($10,300 in 2025, $10,500 in 2026) without the 10% early-withdrawal tax, self-certify eligibility, and repay the money within three years. Plans aren't required to offer it, and it isn't available from plans subject to spousal-consent rules, but it is available from IRAs.

📅 Originally published October 17, 2024 · Updated October 2026 ✍️ Josh ⏱️ 4 min read

Tap 401(k) Funds Without a Tax Penalty: What SECURE 2.0 Changed

Recent changes in retirement law have created new ways for Americans to tap their 401(k) and similar retirement funds without harsh tax penalties. These changes come from the SECURE 2.0 Act, signed into law in late December 2022, and most of the provisions below took effect in 2024. Retirement savings should ideally grow untouched for decades, but Congress recognized that workers face real financial challenges that make locking up every dollar undesirable.

The new provisions offer more flexibility, particularly for people who hesitate to contribute to long-term accounts because they fear needing the money for a short-term emergency. They may encourage more people to participate in retirement plans while easing worries about immediate financial security. One important catch up front: nearly all of these features are optional for employers, so whether you can use them depends on your plan.

Flexibility in Tapping 401(k) Funds

SECURE 2.0 created the emergency personal expense distribution. Once per calendar year, you can withdraw up to $1,000 (or your vested balance above $1,000, if that's less) from a 401(k), 403(b), governmental 457(b), or IRA to cover an unforeseeable personal or family emergency. You can self-certify in writing that you face a qualifying emergency, which keeps the process simple.

The withdrawal is still taxed as income, but the 10% early-withdrawal penalty is waived. You can repay it within three years. One guardrail: if you don't repay it (or contribute an equivalent amount in the meantime), you can't take another emergency distribution for the next three calendar years. Even so, this is more forgiving than a 401(k) loan, where leaving your job or missing payments can turn the unpaid balance into taxable income plus the penalty.

Optional, with a twist: employers don't have to add this feature. But under IRS Notice 2024-55, if you take an otherwise permitted distribution that meets the requirements, you can still claim the penalty exception on your tax return, and IRAs qualify regardless of your employer.

Building Emergency Savings Alongside Retirement

One of the biggest deterrents to retirement saving is not being able to reach the money in an emergency. Congress responded with pension-linked emergency savings accounts (PLESAs), which employers can attach to 401(k)-style plans starting with 2024 plan years:

Who and how much: employees who aren't "highly compensated" can be automatically enrolled at up to 3% of pay. The balance built from contributions is capped at $2,500, indexed for inflation to $2,600 in 2026, and employers can set a lower cap.
Taxes: contributions go in after tax (Roth), so withdrawals aren't taxed or penalized.
Access: you can withdraw at least once a month, for any reason, and the first four withdrawals each plan year must be free of fees.
Matching: if your employer matches 401(k) contributions, it must match PLESA contributions at the same rate, with the match going into your retirement account.

For many workers, a small cushion they can reach quickly could provide the peace of mind needed to commit to longer-term saving. Because PLESAs are voluntary, ask HR or your plan administrator whether your plan offers one.

New Provisions for Domestic Abuse Victims

SECURE 2.0 also acknowledges the unique challenges faced by victims of domestic abuse. Since 2024, someone abused by a spouse or domestic partner can, within one year of the abuse, withdraw the lesser of 50% of their vested balance or a dollar cap without the 10% penalty. The cap started at $10,000 and is indexed for inflation: $10,300 in 2025 and $10,500 in 2026. Victims can self-certify and may repay the money over three years. Plans aren't required to offer it, and plans subject to spousal-consent rules can't; IRAs can.

This provision offers a lifeline for people who need immediate resources to escape an abusive situation, without permanently penalizing their long-term savings.

Helping with Student Loan Payments

Another change helps employees balance student loans with retirement saving. Since 2024 plan years, employers can match an employee's qualified student loan payments with contributions to their 401(k), 403(b), governmental 457(b), or SIMPLE IRA, even if the employee isn't contributing to the plan directly. Workers burdened by loan payments can still collect the employer match and build savings while paying down debt. Like the others, this is optional (IRS Notice 2024-63 has the details).

SECURE 2.0 also added narrower penalty exceptions for people who are terminally ill, for victims of federally declared disasters (up to $22,000 per disaster), and, since late December 2025, for paying certain long-term care insurance premiums (up to $2,600 in 2026).

A Step Toward Holistic Financial Planning

SECURE 2.0 aims to reduce some of the barriers that have discouraged people from saving for retirement. By allowing small penalty-free withdrawals and creating ways to build emergency savings, Congress is trying to make retirement planning more accessible to a broader range of workers. Knowing they can reach some money in a crisis may encourage reluctant savers to start.

These are welcome changes for many American workers, helping them balance short-term financial concerns with long-term goals. The practical next step: find out which features your plan has actually adopted, and remember that money taken out early still gives up years of tax-advantaged growth.

This article is for general educational purposes and isn't financial, tax, or legal advice. Retirement plan rules, dollar limits, and which features your employer offers vary by plan and change over time. Before taking a distribution, talk to your plan administrator and a qualified tax professional about your specific situation.

Key Sources

U.S. Senate Committee on Finance. SECURE 2.0 Act of 2022: Section-by-Section Summary, December 19, 2022. PDF
Internal Revenue Service. Retirement plan distributions: IRS provides guidance on certain exceptions from 10% additional tax for emergency personal or family expenses and for survivors of domestic abuse, June 2024. IRS.gov
Internal Revenue Service. Notice 2024-55: Certain exceptions to the 10% additional tax under section 72(t). PDF
Internal Revenue Service. Notice 2024-22: Guidance on anti-abuse rules for pension-linked emergency savings accounts. PDF
Internal Revenue Service. Notice 2024-63: Guidance under section 110 of the SECURE 2.0 Act with respect to matching contributions made on account of qualified student loan payments. PDF
Internal Revenue Service. Notice 2025-67: 2026 amounts relating to retirement plans and IRAs, as adjusted for changes in cost-of-living. PDF
U.S. Department of Labor, Employee Benefits Security Administration. FAQs about Pension-Linked Emergency Savings Accounts, January 2024. DOL.gov