Hi Arce – You have two factors working in your favor, your disability and saving your home. Please discuss this with your tax preparer, preferably a CPA. You should be able to avoid the penalty – but not the ordinary taxes – on the withdrawn amount, but you’ll need proper justification and documentation with your tax documents.

Yes my husband still works for the company, but it is under new ownership. All his previous benefits are under new administrators as well. He had Prudential as his 401K administrator for 24 years and as of Jan 3, 2017 it will be Fidelity. Prudential would not let him take a loan since there was a prior loan with a balance of 5000.00 still owing for the replacement of a sewer system. Not sure whether Fidelity will require the old loan to be paid as well. The hounds are at the door, and the repairs to the house need to be paid, so our only option may be to take the hardship withdrawal and pay the taxes and penalty.

Hi Terry – Unless you’re in jeopardy of losing your home, you may not qualify for a hardship withdrawal. But that may not be as bad as it sounds. Any withdrawal of funds from your plan will be subject to ordinary income tax. But if you can work a hardship withdrawal, the 10% early withdrawal penalty is eliminated. If the plan doesn’t allow a hardship withdrawal, you may have to bite the bullet, take a withdrawal, and pay both the tax and the penalty. I assume he’s no longer working for the company, so a loan is out of the question.

Hi Randy – That sounds excessive, but employers are permitted to define the conditions and terms of hardship withdrawals. It doesn’t make any sense to me since you’re over 59.5. You might want to discuss this in detail with the pension administrator. And if the balance is large enough, you may want to consult a pension or employee benefits attorney.

Probably not Amy, it’s an entirely different situation. But that said, each employer establishes its own rules for both hardship withdrawals and loans, so anything is possible.

Luckily they did approve it. The check is on it’s way. I answered the questions they needed to know the answers to on the hardship withdrawal form and had it notarized at the bank. Then mailed it in. Merrill Lynch said it was approved last week.
Since my parents are my landlords and I’d be kicked out of the house if I didn’t pay rent, they accepted it as a hardship.