Guideline recognizes that you may face financial difficulties from time to time. While we hope you have adequate savings tucked away for financial emergencies, you may be able to draw from your 401(k) savings by taking out a 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 be permanently impacting your retirement readiness.
What’s the difference between a loan and hardship withdrawal?
A 401(k) loan allows you to borrow against your vested 401(k) balance and pay back the balance and interest to your 401(k) over a specified period. A hardship withdrawal is a one-time disbursement of funds. See the chart below for a comparison of loans and hardship withdrawal options.
For more detailed information about each option, check out “Do I qualify for a hardship withdrawal?” and “Can I take a loan from my 401(k) assets?”
More information on the tax implications of loans and hardship withdrawals may be found on the IRS website: retirement loans and hardship distributions.
Want to know if you're eligible for a Guideline 401(k) loan or a hardship withdrawal, or have any other questions? Contact our support team.
| Guideline 401(k) Loan | Hardship Withdrawal | |
| Who is eligible? | An actively employed participant who does not have an outstanding 401(k) loan (in repayment or default). | A participant (whether employed or not) with a documented financial hardship and has exhausted loan options and other financial resources. Qualified hardships include: 1. Medical care expenses (for participant, spouse or dependent); 2. Costs directly related to purchase of a principal residence; 3. Burial or funeral expenses for participant's deceased parent, spouse, children or dependents; 4. Payment of tuition, related educational fees, and room and board expenses, for up to the next twelve (12) months of post‑secondary education for participant, spouse, children, or dependents; 5. Payments necessary to prevent the eviction or foreclosure on principal residence; or 6. Repair of damage to principal residence. Hardship withdrawals may be requested for yourself or a dependent / beneficiary. |
| What are the minimum and maximum amounts? | You may withdraw a loan minimum of $1,000 to a maximum of 50% of your vested account balance under the Plan (not to exceed $50,000 in any 12-month period). Note that a maximum of 50% of your vested account balance may be used as collateral. |
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. If you are using the loan to pay for a primary residence, you may extend the loan payment period. Principal and interest payments are reinvested in the participant’s retirement account. |
Hardship withdrawals cannot be repaid. |
| Penalties | Payments are not taxed if your loan is repaid according to terms (or earlier). If you fail to make payments for ninety days, the loan will be considered in default. This will result in the outstanding loan balance being treated as a taxable distribution. |
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. You cannot make any additional 401(k) contributions for 6 months. At the end of the suspension period, you may resume deferrals by logging into Guideline and adjusting your contribution rate. |
| Fees | $100 origination fee and a $75 annual fee. The fees are debited from your remaining account balance or from the amount disbursed to the client. |
$50 distribution fee. The fees are debited from your remaining account balance or from the amount disbursed to the client. |
| Limitations | You are limited to one active loan at a time. | 2 per plan year. Hardship withdrawals may not be rolled into another plan or IRA |
| Supporting Documents |
Verification of your need for a loan. |
Verification of your qualified hardship. |
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