What is a Hardship Withdrawal?
A hardship withdrawal is a plan provision that allows you to make a withdrawal from your employer sponsored retirement plan due to financial hardship if certain conditions are met (as outlined in the plan document). Keep in mind, you’ll have to pay income taxes on the withdrawal and possibly a 10% federal penalty for early withdrawal.
Everyone, no matter who they are, will face some financial hardship in their lives. When that happens, we may need to dip into our retirement savings, like our 401k funds. If you have a 401k, youre not allowed to touch it until you retire but you may be able to access the money in your 401k with a hardship withdrawal. A hardship withdrawal is exactly what it sounds like special permission to take money out of your 401k fund because youre experiencing an emergency that requires money to be resolved. The government stipulated that American workers can access their 401k retirement funds in important situations, with very steep taxes and penalties, as defined below: -Medical expenses get out of control, and your health insurance only covers part of them -Needing money to buy a home -College tuition -Mortgage or rent payments in order to preclude eviction or foreclosure -Repairs to your home -Funeral costs Clearly, these stipulations for hardship withdrawals from your 401k retirement fund a
Participants can withdraw their deferred contributions if they meet one of the following hardship criteria: • are purchasing a primary residence (excluding mortgage payments) • incur post-secondary tuition expenses for the next semester for themselves or dependents • have extraordinary uninsured medical expenses for themselves or dependents • has expenses for the repair of damage to the participant`s principal residence that would qualify for the casualty deduction under Code Section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income).Code Section 165 specifies that damages must arise from fire, storm, shipwreck, other casualty or damage from theft or • face a foreclosure on the mortgage of their primary residence or eviction from their residence. • has necessary and reasonable expenses related to the funeral or burial of the participant’s parents, spouse, children or dependants. The brochure Determining Eligibility for a 401(k) Hardship Withdrawal
A hardship withdrawal is a withdrawal approved by the Office of Student Support Services as a documented event or serious illness that is beyond the student’s control and prevents the student from continuing or performing successfully in the semester. With a hardship withdrawal, students are expected to withdraw from all courses for the semester. Students are not guaranteed WPs if they withdraw for hardship reasons. Instructors have the prerogative for assigning WP or WF regardless of the reason for withdrawal. If you believe you qualify for a hardship withdrawal and can provide necessary documentation, contact the Office of Student Support Services at 706-542-8220.
