401(k) withdrawals surge
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retirement savings planMoneywise
•Business
Business & Economics
Americans are tapping into their retirement savings early. The dos and don'ts of 'hardship withdrawals'
71% Informative
Hardship withdrawals are running 15% to 20% above the historical norm, Empower CEO Ed Murphy said.
A hardship withdrawal allows you to withdraw money from your 401(k) to cover an “immediate and heavy financial need,” according to the IRS .
The amount you’re allowed to withdraw is limited to the amount necessary to “satisfy that financial need”.
A Roth IRA, where you’ve already paid tax on your contributions, may be a preferable option since you won’t be taxed on withdrawals.
You could also take out a 401(k) loan (versus a hardship withdrawal) that means you pay the money back, but the interest on the loan goes into your account.
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