How to Qualify for a 401k Hardship Withdrawal

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In this video, we’re covering the qualifications for a 401k Hardship Withdrawal and how to know if you qualify.

IRS defines a hardship as, “A financial need may be immediate and heavy even if it was reasonably foreseeable or voluntarily incurred by the employee.”

The amount you pull out must be limited to the amount necessary to satisfy the need. So, if you need $10,000, but you ask for $15,000, that won’t qualify and they may deny your request because it’s over the amount of the need.

The IRS says on their site: Under a “safe harbor” in IRS regulations, an employee is automatically considered to have an immediate and heavy financial need if the distribution is for any of these:

Medical care expenses for the employee, the employee’s spouse, dependents or beneficiary.

Costs directly related to the purchase of an employee’s principal residence (excluding mortgage payments).

Tuition, related educational fees and room and board expenses for the next 12 months of postsecondary education for the employee or the employee’s spouse, children, dependents or beneficiary.

Payments necessary to prevent the eviction of the employee from the employee’s principal residence or foreclosure on the mortgage on that residence.

Funeral expenses for the employee, the employee’s spouse, children, dependents, or beneficiary.

Certain expenses to repair damage to the employee’s principal residence.

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