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.
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.
You can use hardship withdrawals if you’re in specific circumstances such as needing to purchase a primary home,
Higher education fees, prevention of primary residence eviction and more.
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.