Q:

What is a 401(k) hardship withdrawal?

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Quick Answer

The Internal Revenue Service (IRS) defines a 401(k) hardship withdrawal as one that must be made due to "immediate and heavy financial need” of the employee, the employee’s spouse or dependent. The Pension Protection Act of 2006 expanded the rules to include the employee's non-spouse and non-dependent beneficiary.

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Full Answer

The IRS deems financial needs to be immediate and heavy when involving: certain medical-related expenses; costs associated with the purchase of a principal residence; money required to prevent eviction or foreclosure; tuition and educational expenses and fees; burial and funeral expenses and specific costs linked to the repair of damage to the employee’s principal home.

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