Choosing between a loan and hardship withdrawal

You may qualify for a 401(k) loan or a hardship withdrawal if you meet certain eligibility criteria. Before drawing from your retirement savings, we strongly encourage you to exhaust all of your other options, as you may permanently impact your retirement readiness. 

Please go here to learn more about CARES Act changes affecting loans and hardship withdrawals and your options for withdrawing funds from your 401(k) account.

A 401(k) loan allows you to borrow against your vested 401(k) balance and pay back the balance and interest to your account over a specified period of time. A hardship withdrawal is a one time disbursement of funds. See below to learn more about these options:

   Guideline 401(k) Loan  Hardship Withdrawal
Who is eligible?  An actively employed participant who does not have an outstanding 401(k) loan. An actively employed or dismissed participant with a documented financial hardship that has exhausted loan options and other financial resources. See this article to learn more about qualifying hardship circumstances.
How much can I request? You may withdraw a minimum of $1,000 to a maximum of 50% of your vested account balance under the Plan, not to exceed a $50,000 balance in any 12 month period. You may withdraw a minimum of $1,000 to a maximum not to exceed the amount necessary to meet your documented financial need, including taxes, fees, penalties.
Repayment Loans must be paid in equal payments over a period not extending beyond five years from the date of the loan or up to 10 years if for the purchase of a primary residency. Hardship withdrawals cannot be repaid.

Payments are not taxed if your loan is repaid according to the agreed upon terms or sooner. 

If you leave your company and fail to pay back the outstanding balance within 90 days, the outstanding loan will be considered in default and a 1099-R will be issued.

Withdrawals of pre-tax deferrals are taxed as ordinary income. Withdrawals are subject to an additional 10% early withdrawal IRS penalty, except for qualified medical expenses or withdrawals for participants age 59 ½ and older.
Fees There is a $100 origination fee deducted from the amount disbursed and a $75 maintenance fee debited from your remaining account balance on an annual basis. There is a $50 distribution fee deducted from the amount disbursed.
Limitations You are limited to one outstanding loan at a time.

You may request 2 hardship withdrawals per Plan Year. Hardship withdrawals may not be rolled into another plan or IRA.

Supporting Documents

A purchase agreement or mortgage contract is needed if for the purchase of a primary residence to request a loan term over 5 years. Other loans do not need verification.

The hardship withdrawal application allows you to complete a self-certification for your hardship. However, you must keep record of the hardship in the event you are audited.

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