Brad Campbell Discusses New Rule on 401(k) Withdrawals With CNBC

Benefits and executive compensation partner Brad Campbell spoke with CNBC about a new rule permitting 401(k) plans to let participants take limited penalty-free withdrawals to pay for long-term care insurance, as costs continue to rise. The rule was included in 2022 retirement legislation, known as Secure Act 2.0, and had a delayed effective date of December 29, 2025.

The article noted that not all 401(k) sponsors will allow this provision in their plans. However, if permitted, the withdrawal is limited to the cost of your annual insurance premium and cannot exceed 10% of your balance. CNBC stated that it’s important to consider whether using retirement money to pay for long-term care insurance makes sense, or whether you should purchase a policy at all.

Campbell added that while the money you pull wouldn’t be subject to the 10% early withdrawal penalty that usually applies to distributions taken before age 59½, it would still be subject to ordinary income tax rates.