How Do You Calculate Taxes Owed On Hardship Withdrawals?
Most retirement plans provide for distributions in the event of financial hardship. Plans that provide this elective may have specific criteria for withdrawals, such as medical or funeral expenses. Others will allow you to withdraw funds for any reason “deemed necessary.” Either way, you likely will have to pay a penalty if you withdraw before age 59 ½. Review your plan. Each plan is different regarding elective options for distribution. Call your benefits counselor to assist with any questions you may have and to confirm your assumptions. Determine if you qualify for a penalty-free withdrawal. If you become disabled, have debt for medical expenses that exceed 7.5 percent of your adjusted gross income, need the money for alimony or child support or you are separated from your job when you turn 55, you may qualify for a penalty-free withdrawal. Ask your benefits counselor what qualifies under your plan. Use a calculator to determine the penalty for early withdrawal. The tax penalty is a
