Rebuilding After the Wildfires: Using Your 401(k) Plan to Help in Emergency Situations | Jeff J. Kim CFP?

Rebuilding After the Wildfires: Using Your 401(k) Plan to Help in Emergency Situations

By: Jeff J. Kim CFP?

As a financial advisor, I've seen firsthand how unexpected disasters can throw a wrench in people's financial plans. In January 2025, Southern California was devastated by a series of wildfires that have upended our colleagues, loved ones, and neighbors. The Palisades Fire and the Eaton Fire have scorched tens of thousands of acres, destroyed thousands of structures, and forced over 100,000 residents to evacuate. Beyond the property damage, we witnessed the tragic loss of life, severe injuries, and entire communities in distress.

In my years of experience, I've learned that flexibility is key when it comes to financial planning.? That’s why it’s crucial to understand your options when it comes to federally declared disaster withdrawals from your 401(k) plan. These provisions aren’t just a safety net; they’re designed to help you rebuild without derailing your long-term financial future.

On January 8, 2025, President Biden declared Southern California fires a major disaster. This declaration isn't just a formality-? it's financially necessary for those affected.

What This Means for Your 401(k)

If you live in Los Angeles County or have family affected by the fires, pay close attention. This federal disaster declaration unlocks several key financial relief options:

• Qualified Disaster Recovery Distributions: You can withdraw up to $22,000 from your 401(k) without facing the usual 10% early withdrawal penalty— if you suffered an economic loss due to the disaster. Just make sure to take action within 180 days of the disaster (meaning you have until early July 2025 to execute).
• Emergency Personal Expense Distributions: Some plans allow for an additional $1,000 withdrawal to cover emergency expenses. It’s not a huge amount, but in a crisis, every bit helps.
• Hardship Distributions: Many 401(k) plans are permitting hardship withdrawals specifically for wildfire-related expenses. Just remember, unlike the disaster recovery distributions, these may still incur that 10% penalty if you're under 59?.

Here’s where it gets even better— you have the option to pay this money back. If you take a qualified disaster recovery or emergency expense distribution, you can recontribute those funds within three years. Think of it as a financial do-over, allowing you to restore your retirement savings once you're back on your feet.

Disasters are unpredictable, but your financial response doesn't have to be. Understanding these 401(k) disaster withdrawal options is like having a financial lifejacket. It's there when you need it, but hopefully, you'll never have to use it. Just be mindful that any withdrawal is still going to impact your long-term growth so use these options wisely.

For those affected by the wildfires, my heart goes out to you. And for everyone else, let this be a wake-up call. Disasters can happen anywhere, anytime. At Gerber Kawasaki, we're all about innovative thinking and leveraging every tool available to help our clients succeed. These relief options are just one more way to keep your financial future on track, even when disaster strikes.

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Gerber Kawasaki Wealth & Investment Management is an investment advisor located in California. Gerber Kawasaki Wealth & Investment Management is registered with the Securities and Exchange Commission (SEC). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Gerber Kawasaki only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Gerber Kawasaki Wealth & Investment Management 's current written disclosure brochure filed with the SEC which discusses, among other things, Gerber Kawasaki Wealth & Investment Management's business practices, services and fees, is available through the SEC's website at: https://www.adviserinfo.sec.gov .?

Jeff Kim is a Financial Advisor of Santa Monica, California-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately ~$3.36B billion in assets under management as of 12/31/24.? The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn't buy any investment without doing their research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results."?