What Are 401k Hardship Withdrawals?

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Hardship withdrawals for 401K accounts allow individuals to borrow or withdraw money from a 401K plan in the event of various type of hardships, including medical emergencies, national disasters or other extreme situations. Find out how the individual will still be liable for taxes on the money with information from an investment portfolio manager in this free video on 401K plans.

Part of the Video Series: Investing & Retirement Funds
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Video Transcript

Okay, so what are 401K hardship withdrawals? All 401Ks have the stipulation same as IRA retirement plans will have. They will have stipulations where, if you're disabled, unable to work, various types of hardships, diseases or national disasters, they'll allow loans from the 401K, and in some cases for extreme hardships, they'll allow for...just withdrawals. So a hardship withdrawal is pretty specific. You need to know what the stipulations are and what you're able to get. Sometimes it is just a loan, but other times there are full withdrawals. And even with the withdrawals, what you're avoiding is penalty, for the most part. You still will be liable for taxes in ninety percent of cases. So, you know, the hardship withdrawals, it's a good thing to be able to use, but also consult someone who's either the administrator of the 401K. Maybe even preferably an accountant. Someone who understands the tax implications of what you might be walking into.

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