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Hardship Withdrawal

Definition: Hardship Withdrawal

A hardship withdrawal is when a 401(k) account holder removes funds from her retirement savings because of circumstances like job loss, facing home foreclosure, or overwhelming medical expenses. While withdrawal is permitted during those tough times, the account holder cannot get away from the 10 percent tax penalty incurred when the funds are removed.

According to The Wall Street Journal, several 401(k) plan administrators reported a noticeable increase in hardship withdrawals this year compared to last. The shift signals that many 401(k) participants are more concerned about how they will pay their bills than saving for retirement. Administrators have also observed many employees dealing with the tough economy by reducing the amount they contribute to their retirement plans.

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Renees3 Renees3 8 years
Actually I'm taking out a hardship withdrawl for our down payment for the house we're buying.
ilanac13 ilanac13 8 years
well this is something that we knew would happen since the economy is doing so poorly. i think that if there's ANY WAY for me to keep my 409 (k) intact i'm going to - and i'm trying my hardest to not even think to withdrawl funds. i think that it's a good thing that there's an opporutnity for people to avoid the tax in taking money out and if they are seeing an increase in this happening then you know that things are not good all around for employees. i don't know what this says for when we're ready to retire and won't have the extra cushion
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