![]() ![]() ![]() " Publication 5307, Tax Reform Basics for Individuals and Families,". " Do’s and Don’ts of Hardship Distributions." " Retirement Topics-Hardship Distributions." Many-though not all-major employers do this, provided that employees meet specific guidelines and present evidence of the hardship to them. One downside of hardship withdrawals is that, unlike a 401(k) loan, you cannot repay that money back into your plan.Ī hardship withdrawal is an emergency removal of funds from a retirement plan, sought in response to what the IRS terms "an immediate and heavy financial need." It's actually up to the individual plan administrator whether to allow such withdrawals or not.Regardless of whether you pay a penalty, you'll still have to pay income taxes on the amount withdrawn.You may have to pay a 10% penalty if you use the money for the purchase of a new home, education expenses, prevention of foreclosure, or burial expenses.In some instances, you won't have to pay an early withdrawal penalty.While the IRS sets general guidelines, provisions in each individual 401(k) plan determine whether hardship withdrawals are allowed and the specific conditions. ![]() In general, a hardship withdrawal from a 401(k) should be a last resort. ![]()
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