Your eligibility for a hardship withdrawal from your 401(k) plan depends on the plan's rules. The distribution must be made subject to an immediate and heavy financial need where you lack other available resources. You may elect to receive a hardship distribution of all or part of your vested balance under certain circumstances to cover the costs incurred with the following:
- Purchase or repair a primary home
- Pay education tuition, room and board, and fees for the next 12 months for you, your spouse, children, and other dependents
- Prevent eviction or foreclosure on your primary residence
- Address severe financial hardship
- Pay for unreimbursed medical expenses for you, your spouse, children and other dependents
- Pay for funeral expenses for immediate family members—parents, spouse, children, and other dependents
There is a 10% IRS penalty unless your hardship withdrawal results from:
- Your total and permanent disability
- Medical bills that exceed 7.5% of your adjusted gross income
- A court order to pay funds to a spouse, child or dependent
- Permanent lay off, termination, quitting or early retirement in the same year you turn 55
- Permanent lay off, termination, quitting or retirement accompanied by payments for the rest of your (or your designated beneficiaries') life or life expectancy that continue for at least 5 years or until you reach age 59 1/2, whichever is longer
Your elective deferrals are suspended for 6 months after the receipt of the hardship distribution. If you are under age 59 1/2, the 10% early withdrawal penalty will apply to the distribution.