Hardship Withdrawals – How Do You Qualify?
Below is a question that I received from a person on my blog. I understand you can take hardship witrhdrawals from an IRA or 401(k) but have never gone through it with a client. What are the qualifying standards to take a hardship withdrawal? How do you prove it to IRA? The question I received is below. Any help on this is greatly apprciated.
My question is what if you have an IRA or 401k, can you access those
funds if you are facing financial hardship? I believe President Obama
had at one point said that people may have access to those funds without
penalty in 2009. My situation is my husband is unemployed as a result of
a car accident, and I am working part time, all we are living on is
savings and what we can get in unemployment. What savings we do have is
rapidly being depleted. What good is a 401k or IRA if you end up on the
street?
I hope you can answer my question. Thank you.
Permalink Submitted by Denise Appleby on Sat, 2009-03-14 18:31
For a 401(k) plan, the plan document must be consulted to determine if and when a hardship distribution can be taken. The plan document should also define ‘hardship’. See http://www.retirementdictionary.com/Hardship-Withdrawal.htm
For an IRA, there is no hardship withdrawal provision. However, the 10% early distribution penalty is waived under certain circumstances. Seehttp://www.retirementdictionary.com/earlydistributionpenaltyexception.htm