Do 401(k) plans allow a hardship distribution?

Many 401 (k) plans allow you to withdraw money before you actually retire to pay for certain events that cause you a financial hardship. For example, some 401 (k) plans may allow a hardship distribution to pay for your, your spouse’s, your dependents’ or your primary plan beneficiary’s: tuition and related educational expenses.

Who qualifies for a 401(k) hardship withdrawal?

According to the IRS, the following as situations might qualify for a 401 (k) hardship withdrawal: Certain medical expenses. Burial or funeral costs. Costs related to purchasing a principal residence. College tuition and education fees for the next 12 months. Expenses required to avoid a foreclosure or eviction.

What is a 401(k) hardship withdrawal?

A 401 (k) hardship withdrawal is a withdrawal from a 401 (k) for an "immediate and heavy financial need." It is an authorized withdrawal, meaning the IRS can waive penalties, but it does not relieve you of your tax responsibilities. Before you tap your retirement savings to cover a large, unexpected expense, check that you're allowed to do so.