What is a hardship withdrawal from a 401k?

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7 years ago

Not all 401k plans allow hardship withdrawals. Those that do often only allow hardship withdrawals for certain purposes specified in the “plan document” (ask your HR department for a copy), and normally can only be utilized after loans have already been maximized, if loans are allowed. When hardship withdrawals are taken, they cannot be paid back to a 401k account, and the plan participant is charged a 10% penalty by the IRA, and then the withdrawal is taxed as income.

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