Definition of Hardship Withdrawal
What is a hardship withdrawal? What is the definition of a hardship withdrawal?
A "hardship withdrawal" occurs when an amount of money is withdrawn from a workplace savings plan when the account holder is undergoing a "financial hardship".
Most savings plans allow for "hardship withdrawals", however there are certain criteria that must be met, in addition to tax implications that must be considered.
"Hardship withdrawals" for 403(b) and 401(k) plans are limited to:
-burial or funeral expenses
-payments necessary to prevent eviction or foreclosure
-payments of post-secondary education expenses
-purchase of a primary residence
-payment of certain medical expenses
-repair of damage to principal residence
In addition to the tax implications, you may also be subject to an early withdrawal penalty, depending on your circumstances.
If you are unsure as to whether or not your situation qualifies as a "financial hardship", I would recommend consulting an experienced professional who can help to explain your options. In addition, you will probably want to talk to an accountant to fully understand the tax implications of such a move.
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