In this episode, Ed and Dan explore a new SECURE 2.0 provision that may allow penalty-free withdrawals from certain qualified retirement plans to help pay long-term care (LTC) insurance premiums. Beginning after December 29, 2025, eligible plan participants under age 59½ may be able to access limited retirement funds without the 10% early withdrawal penalty when used for certified LTC insurance costs. The episode breaks down eligibility rules, dollar limits, plan restrictions, and what this means for federal employees enrolled in the FLTCIP.
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FedLife Podcast (Ep. 169): Using Retirement Funds to Pay LTC Insurance Premiums (SECURE 2.0 Update)
Join us as Dan and Ed break down a new retirement planning strategy that could help certain workers manage rising long-term care insurance costs using qualified plan distributions.
In this episode, you’ll learn:
- What the SECURE 2.0 provision allows regarding penalty-free LTC insurance premium payments
- Which retirement plans qualify (401(k), 403(b), 457(b), etc.) and why IRAs are excluded
- Who is eligible and why the TSP does not currently offer this feature
- The limits on annual distributions for LTC premiums
- Types of long-term care insurance contracts that qualify under IRS rules
- How this provision may apply to federal employees and FLTCIP participants
- Alternative strategies if the TSP does not adopt this provision
- How Health Savings Accounts (HSAs) may be used to help cover LTC premiums
- Key risks of reducing retirement savings to pay insurance costs
- Why employer adoption and future IRS guidance will shape how this rule is implemented
Source Article: https://stwserve.com/understanding-secure-act-2-0s-penalty-free-ltc-insurance-retirement-plan-distribution-provision/
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