Your 401k retirement account is meant to remain untouched until you have reached the age of retirement - But in an emergency, it may be your only source to tap into.
You CAN withdraw funds from your 401k account early but the amount will be subjected to a 10% penalty fee in addition to the taxes assessed on the amount by the IRS.
If you’re okay with the 10% penalty fee, you can go ahead and request a withdrawal. However, if you want to avoid the penalty fees, here are your options.
In hardship situations, the federal government gives administrators of retirement plans the ability to offer 401k loans.
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Not all providers will offer such loans but if you are in need of cash, you can inquire with your provider.
Generally, you can loan up to 50% of their vested balance with a maximum loan amount of $50,000. The loan must then be paid back with interest within a 5 year time period.
If you are not eligible for a 401k loan, you may still be able to access your retirement funds when you have a genuine need.
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You can use hardship withdrawals if you’re in specific circumstances such as needing to purchase a primary home,
You will have to prove that you are in dire financial need and have no other sources of income to tap into to be eligible for a penalty free hardship withdrawal
If you need your 401K money now and meet the conditions we mentioned, you will be able to tap into your 401K.