Tapping Your Retirement? Explore All Options Before Taking a Hardship Withdrawal
Considering a hardship withdrawal from your retirement account? Learn crucial steps to take first, including exploring other financial options, understanding plan rules, and navigating tax implications. Expert advice from Jeffrey Levine helps you make the best of a tough situation.
Key Takeaways
- Exhaust non-retirement options first: check savings accounts, home equity, or borrowing from family before touching retirement funds, since withdrawing early has significant tax consequences
- Verify your plan's rules on hardship distributions—IRAs generally allow access, but employer plans have specific rules and may offer loans as an alternative
- Traditional retirement account withdrawals trigger both income tax and a 10% early withdrawal penalty, unless you qualify for an exception (higher education, disability, or the new 2024 $1,000 emergency exception)
- If using the new 2024 emergency withdrawal exception, note it's capped at $1,000—if you need more, you won't qualify for that penalty exemption and will owe the full 10% penalty plus income tax
Tapping Your Retirement? Explore All Options Before Taking a Hardship Withdrawal: Considering a hardship withdrawal from your retirement account? Learn crucial steps to take first, including exploring other financial options, understanding plan rules, and navigating tax implications. Expert advice from Jeffrey Levine helps you make the best of a tough situation. Watch more episodes of Ask The Hammer on finStream TV at this link: https://www.finstream.tv/videos/ask-the-hammer/
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