By Mary Ellen Cagnassola, Money.com featuring  David Koch, CFP®, AIF®, CFA, Director of Portfolio Management/Senior Wealth Advisor

When emergency expenses like medical bills or funeral costs pop up, sometimes retirement savers have no choice but to borrow from their tax-deferred accounts — try as they might not to touch that money before they reach their 60s.

Taking distributions from retirement accounts before the account holder is 59 ½ years old typically comes with a 10% early withdrawal penalty, even if it’s for emergency purposes. Starting this year, though, there are new exceptions to this rule intended to help workers fill unexpected financial gaps.

Thanks to a law known as SECURE 2.0, workers can now self-certify withdrawals for an “immediate and heavy financial need” — aka a qualifying personal or family emergency. The withdrawals can be up to $1,000 once per year from a 401(k), 403(b) or governmental 457(b) plan. There’s no penalty, and repaying the distribution is optional for the employee.

David Koch, director of portfolio management and senior wealth advisor at Halbert Hargrove, says what makes this rule so major is that retirement plans aren’t required to provide hardship distributions. Now that the burden and liability of submitting adequate documentation has shifted from employer to employee, he expects more plans will allow them.

But with more people raiding their retirement savings lately to cope with the rising cost of living, will these new allowances encourage workers to redirect money that should be going toward one of life’s biggest expenses?

“A hardship distribution allows for a participant to take funds out of a retirement plan provided that the funds are needed, due to an immediate and heavy financial need,” Koch says.  “Buying a boat or a TV would probably not qualify.”

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