It will soon be easier for cash-strapped Americans to tap their retirement savings for emergency expenses.

President Joe Biden is poised to sign a $1.7 trillion bill that amends rules related to so-called hardship distributions from 401(k) plans.

The measures are tucked into “Secure 2.0,” a collection of retirement reforms attached to the overall legislative package, which will fund the federal government for the rest of the fiscal year through next September. The House and Senate passed the bill last week.

Current rules around hardship withdrawals allow workers to access their 401(k) savings plans before retirement for an “immediate and heavy” financial need. Workers may owe income tax on that withdrawal, and those under age 59½ generally owe a 10% tax penalty for early withdrawal.

New rules let savers make one withdrawal of up to $1,000 a year for personal or family emergency expenses. The measure — which takes effect in 2024 and also applies to individual retirement accounts — waives the 10% tax penalty. Americans can self-certify in writing that they need the funds for an emergency.

Taxpayers have the option to repay the funds within three years. They can’t take more emergency withdrawals within three years unless they repay the initial distribution or they make regular deposits that at least match the withdrawn amount.

The legislation also lets 401(k) savers self-certify that they meet the condition for a typical hardship distribution, which is the case under current rules in some but not all 401(k) plans.

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