The damage from Hurricane Sandy has been estimated at over $60 billion, second only to the total caused by Hurricane Katrina in 2005 along the Gulf Coast. Thousands of homes and businesses along the East Coast have been destroyed and countless more have suffered significant damage. Some damage is covered by insurance and hundreds of millions of federal assistance dollars are available; but many homeowners still face staggering repair bills and storm-related expenses, including the cost of food and alternative lodging.
For some, the only source of funds to cover these expenses is the individual retirement account, either through loans or withdrawals. Normally loans and hardship withdrawals have significant restrictions and limitations imposed by the plans. Certain conditions must be met and paperwork assembled before a loan or distribution may be permitted. Some plans have regulations that specify what constitutes a “hardship” withdrawal. The IRS has allowed plans to relax those restrictions to now allow for Sandy-related expenses. In some cases, even those plans that do not normally permit any hardship withdrawals are allowed to do so under a recent IRS announcement. The IRS has relaxed some procedural and administrative rules to make retirement funds more readily available to Sandy victims. This relief is aimed at individuals’ primary residence (vacation homes are not included). In addition, relatives outside the affected area can tap their retirement funds to assist the homeowner in a designated disaster area.
