The IRS released final rules around hardship withdrawals, making it substantially easier to raid your 401(k).
Share to linkedinIt just got easier to take money out of your 401 or 403 retirement plan. The Internal Revenue Service has issuedthat spell out a host of changes meant to cut down on red tape. Some are mandatory—employers must make the changes as of Jan. 1, 2020, and other are optional. So, how lenient your retirement plan rules are still depends in part on your employer.
But what if you really need the cash? First consider options other than a hardship withdrawal. If you have a Roth IRA, you can always withdraw the money you’ve contributed penalty-free and tax-free. The next choice would be to consider a 401 loan. You can borrow up to $50,000, or half the balance in your account, whichever is less. Then you end up paying it back to yourself ) with interest. That means you avoid the tax hit and preserve your retirement funds.
The other safe harbor withdrawal categories are: medical expenses, home purchase costs, college costs for the next 12 months, payments to prevent eviction/foreclosure, funeral expenses and home casualty loss repairs.
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