There are certain penalties that come with withdrawing money from a 401k. This is in addition to the Ordinary Income tax you would pay. What you should note is that if you withdraw from a 401k, you will miss out on the opportunity to grow.

Request a Hardship Withdrawal

In a situation where you are faced with any circumstances, you can qualify for a hardship withdrawal. With this withdrawal, you can take money out of your 401k plan, and you won’t have to pay the penalty that comes with a normal withdrawal. According to the IRS, hardship is defined as a heavy financial or immediate need. This article with help you in knowing how to get my 401k  without being penalized.

While hardship withdrawal is handy, you should note that not all 401k plans will let you maximize the opportunity to use the hardship withdrawal. If you are considering this type of withdrawal, it’s best to consult with your plan administrator to be sure that the feature is available. Another thing to have in mind is that after taking your money via this means, you won’t be able to put the money back when the situation gets better.

All the money that goes into your 401k has to be a rollover from a retirement plan or through your payroll deferment. After you are sure that you want that you want the hardship withdrawal and consider it the best option for you, and you are sure that you qualify for the withdrawal, the next thing is to fill out the necessary forms, do paperwork, and all the vital documentation that your employer requests. With that in order, you only need to check for the amount and less the fees and taxes.

Also, you might have the option for direct deposit through your 401k provider, but note that this option is not always available. Another key thing to have in mind is that distribution from the conventional 401k requires an account for federal taxes.

Exceptions to the Penalty

Here are some other exceptions to the penalty that you should be away of:

• Funeral expenses for you or your dependents, including children or spouse
• Medical care for you and your dependents or beneficiary
• Tuition and other educational-related expenses, including accommodation expenses for you and your dependents or beneficiary.
• Expenses that are related to the purchase of a residence. However, this does not include the mortgage payments
• Payments with the aim of preventing a possible eviction out of your main residence or even for the foreclosure that is on a mortgage of your home.
• Other expenses that relate to repairs on your main residence.

While these are the exceptions that you should know, another thing to note is that there are also limits attached to your withdrawals, especially when it comes to the 401k hardship distribution. The reason why you should take of this is to help you ensure that you don’t try to play smart or outsmart the IRS. If the amount you need for the hardship withdrawal is only $5,000, that should only be the amount that you should take out of the 401k account.

Another important aspect that you should note is that there are also alternatives to 401k withdrawals. Sometimes, it’s wise to consider some of these options so that you don’t end up putting all your eggs in one basket. One of the options that you might want to consider is to take a 401k loan. This is also a reliable way to get money from 401k, but you should note that not all companies offer the opportunity to maximize the 401k load, but in a case where it is available, it’s a nice option.