Do I qualify for a hardship withdrawal?

In certain circumstances, Guideline permits you to take a hardship withdrawal against your 401(k) balance. You can review applicable hardship withdrawal fee within your Terms of Service document under the Individual Fees section here. While we understand you may find yourself in a situation where you need to take money out of your 401(k), we do discourage taking hardship withdrawal unless you have already exhausted other alternatives, as you will be directly cutting into your retirement savings. 

Hardship withdrawals are subject to income taxes, plus an additional 10% tax for early distribution if you are under the age of 59 ½. Employees who take a hardship distribution cannot repay it back to the plan so it is important to note that this choice will permanently reduce the value of the benefits you will receive at retirement.

Before requesting a hardship withdrawal, it’s important to determine if you are eligible:

  • The minimum amount you can request as a hardship distribution is $1000.
  • You can receive no more than 2 hardship distributions during a Plan Year.
  • Generally, you may only withdraw money within your 401(k) account that you invested as salary contributions.
  • You have an immediate and heavy financial need even if it was reasonably foreseeable or voluntarily incurred.  
  • The amount requested is not more than the amount needed to relieve your financial need, but can include any amounts necessary to pay any taxes or penalties reasonably anticipated.
  • You have exhausted all other options and you lack other available resources.

A hardship withdrawal may only be made under the following circumstances:

  1. Expenses for medical care described in Section 213(d) of the Internal Revenue Code either previously incurred by you, your spouse or your dependent or necessary for you, your spouse or your dependent to obtain medical care.
  2. Costs directly related to the purchase of your principal residence, excluding mortgage payments.
  3. Tuition, educational fees, and room and board expenses for the next twelve (12) months of post‑secondary education for yourself, your spouse or your dependent.
  4. Amounts necessary to prevent your eviction from your principal residence or foreclosure on the mortgage of your principal residence.
  5. Payments for burial or funeral expenses for your deceased parent, spouse, children or other dependents.
  6. Expenses for the repair of damage to your principal residence that would qualify for the casualty deduction under the Internal Revenue Code.
  7. Costs directly related to losses from a federally declared emergency at your primary residence or place of work.

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

If you qualify to take out a hardship withdrawal, please see the following helpful article How do I request a hardship withdrawal?

 

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