How to Take an IRA Hardship Withdrawal
Many people, at one time or another, fall on financial hard times. Unexpected medical bills, lost jobs or other events can lead to financial stress. You might elect to take a hardship withdrawal from your IRA to help you through these tough times. If your plan allows, consider taking a hardship withdrawal from your IRA.
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Instructions
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Check that your particular hardship meets the criteria for a hardship withdrawal offered by your IRA. Some plans, for example, will allow for a hardship only for medical expenses, while others might include college tuition payments or other financial needs.
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Submit a detailed explanation of your financial hardship to your plan. Provide whatever proof your IRA requires to support your hardship claims.
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Decide how much money you will need to withdraw from your IRA to satisfy your hardship. A limit is usually set as far as how much you can withdraw from your IRA. Determine if the most you can withdraw will be enough to help you in your particular situation.
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Consult with your IRA plan representative or a financial or tax adviser about taking a hardship withdrawal prior to making the request. Know all the details of such an action before finalizing the transaction.
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Tips & Warnings
The amount that can be withdrawn from an IRA due to a hardship cannot be more than the total of your contributions.
By law, a hardship withdrawal from an IRA is exempt from federal income tax withholding, but is still eligible for other income tax.
If your IRA is through your place of employment, your employer may ultimately decide if your current situation constitutes a hardship.
Penalties and taxes may apply to your hardship withdrawal.
You may be suspended from making contributions to your IRA for up to six months following a hardship withdrawal.
Hardship withdrawals are not repaid to the IRA; thus, your account will be permanently reduced should you take a hardship withdrawal.
