Expanding Penalty Free Withdrawal Act

This bill lets people who lost their job take money from their retirement accounts without paying the usual 10% early withdrawal penalty, if they’ve received unemployment benefits for 26 straight weeks (or the maximum allowed in their state). Withdrawals can be made during the tax year you received unemployment or the next year, but only up to set limits.

The penalty-free amount is limited to the lesser of: $50,000 over a 12‑month period, or the greater of $10,000 or half of your retirement savings at the time you take the money. After you’ve been back at work for at least 60 days, new withdrawals would again face the 10% penalty. These changes apply to withdrawals made after December 31, 2024.

• Who is affected: People who are unemployed and receiving benefits for 26 consecutive weeks (or their state’s maximum).
• What changes: Allows limited, penalty‑free early withdrawals from retirement accounts during unemployment; penalty returns 60 days after reemployment.
• When: Applies to withdrawals made after December 31, 2024.