Penalty-Free 401(k) Withdrawals to Pay for Long-Term Care Insurance Premiums
If you have money saved for retirement, especially if at least some of that money is in an employer-provided 401(k) account, then you are in a better position than most people are. You have already avoided the worst-case scenario, where your only retirement income comes from your Social Security checks, which are not enough to make ends meet. You might own a house and have a personal savings account full of money, in addition to your 401(k) account, but no matter how prosperous you feel now, a serious illness can throw a monkey wrench in your plans. No matter how expensive you are imagining long-term care being, it is even more expensive. Unless you are a multimillionaire with multiple generous relatives who are also multimillionaire relatives, you need long-term care insurance to prevent your future ill health from wiping out your retirement savings. The bad news is that, unless you buy it early, long before you are sure you will need it, long-term care insurance is prohibitively expensive. The good news is that a new law enables you to withdraw up to $2,600 per year from your 401(k) account to pay long-term care insurance without incurring the usual early withdrawal penalty, as long as you do it before you are 59 years and six months old. To find out more about building long-term care insurance into your budget, contact a Washington, D.C. estate planning lawyer.
The Key to a Stress-Free Retirement Is Buying Long-Term Care Insurance Before You Turn 60
Long-term care insurance is one of the best investments you can make. It pays for a variety of long-term care expenses, including residential care in a nursing home or memory care facility, renting an apartment in an assisted living facility, or even home health aide services. Unless you are fabulously wealthy, long-term care is the only way you can afford to live in an assisted living facility without selling the house that you have invested in as generational wealth. One month of rent in an assisted living facility costs more than one year of long-term care insurance premiums, and that is for an ordinary assisted living facility, not even one of those fancy Boomer Enrichment Centers that journalists had so much fun describing in the last days of journalism, before AI chatbots started reporting the news.
Unfortunately, if you wait until you are in your 60s to buy long-term care insurance, you will have missed the boat. Premiums will cost a bundle, if the insurers are even willing to underwrite your policy at all. If you can pay the premiums without taking money out of your 401(k), this is best, but if you can’t, then it is worth making the penalty-free withdrawal to buy long-term care insurance.
Contact Tobin O’Connor Concino P.C. About Planning for Long-Term Care
A Washington, D.C. estate planning attorney can help you strategize about how to pay for long-term care, including buying long-term care insurance sooner rather than later. Contact Tobin O’Connor Concino P.C. in Washington, D.C. or call 202-362-5900.
Source:
cnbc.com/2025/12/30/early-401k-withdrawals-ltc-insurance.html
