How to Ask for Your Investment Due to Hardship
When you need access to money, taking some of the money that you have in investments can sometimes help you bridge the financial gap. Depending on where your investment funds are located, getting the money due to a financial hardship may be difficult or it could be as simple as requesting a withdrawal. When you take money out of an investment account, you may also have to pay an early distribution penalty equal to 10 percent of the amount of your withdrawal.
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Instructions
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Contact your employer about making a hardship withdrawal from your 401k. If you participate in a 401k program, you may have the option of taking money out through a hardship withdrawal. In some cases, you will have to prove your financial need with documentation. Other plans simply allow you to take the money out without proof. When you take money out of a 401k before you reach the age of 59 1/2, you will have to pay a 10 percent early distribution penalty and pay taxes on the amount of your withdrawal.
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Fill out a withdrawal request form with your individual retirement account provider. If you have an IRA, you can take money out of the account anytime you want, regardless of whether you have a financial hardship or you simply want to take a vacation. Each provider will have a slightly different process for taking the money out, but most of the time, you must fill out a form and sign it. When you take money out of your IRA, the same early distribution penalty applies if you are not yet 59 1/2.
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Liquidate the appropriate amount of investments in your standard investment account and then make a withdrawal. If you are taking money out of a standard investment account and it is not a retirement account, you can take money out at your discretion. You will not have to pay a 10 percent early distribution penalty with this type of account.
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Tips & Warnings
Consider a 401k loan if you participate in this type of plan. With a loan, you will not have to pay a 10 percent early distribution penalty or taxes. You will have to repay the loan with interest, but it could help you save some money on the distribution.
Tapping into your retirement or investment funds for a financial hardship can set back your retirement for years. You lose out on the compound interest that you would have been accumulating, and you have to save money to get your account back to the point where it was.
