Date: 19 Mar 2010 Comments: 0

Taking out 401k hardship withdraws can help you in a time of crisis. However it can actually be pretty bad for your retirment savings, so make sure you have looked at all other alternatives first. So what are they and how can they help you?

There are a few 401k withdrawal options available to you if you want to take money out early, but to qualify for a hardship withdraw you are going to have to meet some sort of hardship. Also you cannot have any other resources that can help you pay for it.

Now that you know what it is, how do you do it. The very first step of getting out a hardship withdrawal from your 401k is to write something called a hardship withdraw letter. In this letter you state why you need the money and that you understand the risks and disadvantages of taking money out from your plan early.

There are many letters for this throughout the internet you can find one, print it out and fill in the blanks. You must also be able to prove that you are indeed in a sticky situation and have no other way to get out of it.

Each plan may have different rules on what they consider proof, so check with your plan in order to figure out what documents you will need to present. Once you prove this you will be able to take out enough money to pay for your hardship.

If you want to simply cash out your 401k you can, but you don’t need to go through this process for that.

Usually one of the 401k tips that people will receive is that it is a bad idea to take money out of your account early. This is true, so look for other alternatives first, but if it is your only option you got to do what you got to do. Even so, when you get back on your feet it can be wise to invest more money for your retirement to make up for the setback.