Hardship Withdrawal From 401k

can I get a hardship withdrawal well in

this video I'll go over the what is how

to and the taxes on the hardship

withdraw and if you stay to the very end

I'll give you some strategies and the

updated new strategies after the cares

Act coming up

although hi everyone my name is Matt or

guru i'm a chartered retirement planning

counselor and I've been helping

individuals navigate their financial

future and help them obtain financial

independence for more resources on

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videos from time to time before we dive

into today's topic I must disclose as a

financial adviser and financial

professional that myself my affiliates

and related parties do not provide

investment tax a legal or accounting

advice the material here prepared today

is for educational and informational

purposes only and should not be relied

on or taken as investment tax legal or

accounting advice you should always

consult your own investment tax legal

and accounting advisers before taking

any transactions alright so what are the

hardship withdrawal rules the IRS

determines the hardship as immediate and

heavy financial obligation and the

amount necessary is to be taken from the

401k and that's all you can take it must

be exactly the amount that is sufficient

to fulfill that need the need can be for

both the employee and or a spouse and

dependent for the exact language that

the IRS uses please see the link in the

description below one important note is

that if you do have other assets

available that would be able to cover

this hardship then you must exhaust all

those assets before you can take a

hardship which are from before 1k all

right so how do you take a hardship

withdrawal from the 401k in other words

how do

proof unfortunately it does depend on

the plan that you're in most plans

because they don't want to get too

creative will actually do what's called

a deemed necessary rule in other words

all the things that were in that link

down below those are all things that are

acceptable for that plan so quick tip

for those of you folks who have an IRA

that's an individual retirement account

you actually don't have to file for a

hardship or job any kind you always have

access to that money inside the IRA

because it is 100% controlled by you

there are early withdrawal penalties and

tax implications when taking those up

but that's for the next section if you

guys are finding value you learned

something they hit that like button for

malaria Thanks 401k withdrawal tax so up

until now we didn't really go into any

kind of actual tax implications when

taking any kind of withdrawals so here's

one thing you must realize that before

1k if it is a standard deferred 401k

then you'll have to pay gross income tax

on all the money that you would draw in

addition to that you also have to pay a

premature distribution penalty if you

are under the age of 59 and a half the

IRS does give us extra provisions though

in order to waive that 10% early

withdrawal penalty the IRS has a table

that I have linked in the description

below but it basically comes down to

death disability or unreimbursed medical

bills that exceed 10% of your AGI so

because of the cares act that took place

in 2020 people who have a Kovan 19

related disaster or hardship actually

have a little bit different provision

when it comes to a 401k many of you may

know this or may not but the 401k

actually has a loan provision and in

this loan provision you can take up to


or 50% whichever is lower in a form of a

loan and this loan is number one not

taxable because it is meant to be a loan

you have to repay it so that is the

distinguishing factor of a hardship

withdrawal and a loan is that the loan

has to be repaid you don't have to file

for any of the hardship or anything like

that you simply contact your plan

sponsor let them know you want to apply

for a loan or try and go through the

loan process and they will tell you what

you need to do now going back to what I

said about the Cova 19 if you a spouse

or dependent was diagnosed with the Cova

19 you are qualified as a Cova 19 a

hardship withdraw or hardship loan

provision under the cares Act which

means that your $50,000 loan maximum is

increased to $100,000 now that also all

follows the same rules on vested account

balance 50% of the balance or which

everyone is less right so 50% of the

account balance up to $100,000 depending

on your account balance you have with

the 401k the second thing you can do is

if you have hardship due to the Cova 19

in the employment section so if you are

unemployed furloughed or your company

somehow shut down your loan amount does

increase again

but before utilize any of what I said in

regards to the cares act check with your

plan sponsor because a lot of them right

now are struggling to figure out how

they can mark these loans as a covert 19

loan be sure to check with your plan

sponsor the 401k administrator or

investment company before doing any of


so with these stiff penalties and

problematic provisions of the hardship

withdrawal most times this would be your

last resort always look to the plan

loans on the 401k

before thinking about the hardship

withdraw and always ask your plant

sponsor the 401k administrator on what

your plan offers you in the case of

accessing your money early so I hope

today's video helped you understand what

the hardship withdrawal is how to take

it what the taxes are in potential other

ways to access that money in your 401k

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if you found it valuable and we'll see

you next time