What should I know before I make a hardship withdrawal from my 401(k) plan?

Answer by  dukespook (42)

First what conditions are required for a hardship withdrawl - what constitutes a hardship according to the plan. Secondly, are there any IRS tax implications for the withdrawl.

Answer by  mem4dr (1378)

You have to pay back the money you withdraw before you can continue contributing before-tax dollars to the plan. Also, if you don't pay back the withdrawal, then you will be charged penalties in the form of taxes. It is best to avoid taking from your plan if possible.

Answer by  tamarawilhite (17883)

Even with a hardship deferral, if you are younger than 59 1/2 or not disabled, you will have to pay federal income taxes on the money pulled out of the 401K plan. You may also have to pay state income taxes, depending on where you live. If you pull out money, expect at least 30% to be owed in taxes.