Overview

As of May 1, 2020, our 401(k) plan allows for hardship withdrawals. The hardship withdrawal allows you to access funds from your 401(k) before the eligible age of 59 1/2 years old.

Here are a few things to keep in mind:

• A hardship withdrawal from a 401(k) retirement account can help you come up with much needed funds in a pinch, but you must be able to prove that there is an immediate and heavy financial need.
• Unlike a 401(k) loan, the funds do not need to be repaid. But you must pay taxes on the amount of the withdrawal. Depending on the reason for the withdrawal a penalty may also apply.
• A hardship withdrawal can give you retirement funds penalty-free, but only for certain specific qualified expenses such as crippling medical bills or the presence of a disability (see below).
• You can’t just withdraw as much as you want; it must be the amount “necessary to satisfy the financial need.”

The IRS defines a hardship as an “immediate and heavy financial need.” The withdrawal can be made to accommodate the need of a spouse, dependent, or beneficiary.

Immediate and heavy expenses include the following:

• Certain medical expenses incurred or necessary for medical care for you, your spouse, children or dependents
• Home-buying expenses for a principal residence
• Up to 12 months’ worth of tuition and fees for post-secondary education
• Expenses to prevent being foreclosed on or evicted
• Burial or funeral expenses
• Certain expenses to repair casualty losses to a principal residence (such as losses from fires, earthquakes, or floods)

You will need to provide documentation that supports the reason for your withdrawal.

Please note: You won’t qualify for a hardship withdrawal if you have other assets that you could draw on to meet the need or insurance that will cover the need.