401k question? HARDSHIP WITHDRAW?

Question

is it hard to withdraw money from the 401k plan if i do a hardship withdrawl/ HOW LONG DOES IT TAKE TO BE APPROVED?

Answer 1

It really depends on your plan.  Typically 2 weeks.  However, if there is anyway you can avoid doing this, please do so.  It will cost you a fortune if you are under age 55.  You will pay federal and state taxes on the withdrawal, plus a penalty of 10%.  These taxes and penalty will eat up almost half of your withdrawal.  So, if you withdraw $10,000, you might actually get a check for $10,000, but you will owe the tax man $5,000 next April.  And, they won't forgive it even with a hardship withdrawal.

Try to get some financing another way.  Your plan might offer a loan against the 401k.  It's not a great option, but better than an outright withdrawal.

Answer 2

from what I';ve read, you might not be able to do a hardship withdrawal until you max out your 401k loan capability - take to the 401k administrator and see what your options and the affect on your taxable income

Answer 3

Both of the above are mostly right. The penalty tax comes in if you are under the age of 59 1/2. Hardships are viewed as a last resort by the IRS so you must exhaust other means (such as loans) first. Each plan is different but hardships are for specific reasons such as, prevent eviction orforeclosuree, pay for health bills not covered by insurance, the next 12 month tuition at a college oruniversityy....there are more but you will have to qualify under one of those and provide documentation.

I agree it is not the best way to do it. Too many taxes involved.