401K distribution

Submitted by Linda Randazzo on Sat, 2009-02-14 13:45

I’m asking on someone elses behalf. I don’t have a 401K. If a plan participant wants to take an early distribution to help them with a mortgage modification. (They need to to be able to continue making payments) would this be an exception and possibly fall under a hardship reason?

Thanks



Submitted by Al Fry on Sat, 2009-02-14 16:53

I know some time in the past, if one could prove they were in danger of losing their home without the distribution, this could be a hardship distribution. Others on this forum may have more up-to-date info.



Submitted by Linda Randazzo on Sat, 2009-02-14 18:36

Thanks for the reply

Anyone have any info?



Submitted by Alan Spross on Sat, 2009-02-14 19:03

If the plan offers hardship distributions, foreclosure avoidance funds would certainly qualify. However, some plans may first require a plan loan to be taken out prior to hardship treatment. A loan would avoid tax and early withdrawal penalty, but of course it also has it own risks including separation from service resulting in the loan becoming due within a certain period eg 60-90 days.



Submitted by Al Fry on Sat, 2009-02-14 19:10

Plus, of course loan payments, on top of the mortgage payments.



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