A hardship withdrawal from 401k accounts is allowed when there is an urgent and heavy need for money that can't be met by other means.
This could be due to a medical issue, education expenses, funeral expenses, or to purchase or preserve a primary residence.
A serious illness may create a need for a 401k hardship withdrawal.
You would use this type of withdrawal when your 401k account exists with your current employer.
You will need to meet their criteria for what constitutes a hardship.
If you happen to leave your job to take a different one or due to a layoff, you would simply cash out your 401k and rollover the portion you don't need immediately.
In your employer's plan, you can only withdraw from the portion of funds that you originally contributed, not the total balance which may include earnings from investments as well as matching funds paid by your employer.
Some plans may allow access to matching and/or discretionary contributions made by the employer.
You will pay income taxes on the hardship withdrawal from your 401k accounts as well as the 10% early withdrawal penalty.
Here are examples of when you might need a hardship withdrawal
Before requesting a hardship withdrawal, you should consider all other solutions to the problem. Your retirement savings should always be the absolute last resort and ideally never used until retirement time.
Don't take this decision lightly.
I hope this information is helpful if you are considering a hardship withdrawal from 401k funds.
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