The word is out about 401k hardship withdrawals and how they are helping people across the country. For those of us who know that you cannot get anything for free, we are wondering whether or not this is too good of an offer to be true. Sure your neighbors and friends are returning to school and paying bills with the money from their 401k retirement plans, but is this the best idea? Is it actually, really, truly possible? And what are the hang-ups involved for cashing out your 401k early? Before you decided how to spend the money you will receive from your 401k, first learn that facts that you need to know to get your 401k hardship withdrawal.

For those of you researching and looking into 401k hardship withdrawal, know that this is not always the best way to get cash fast. Depending on your financial situation or credit and debt problems, maybe cashing in your 401k retirement plan is a great way to climb your way out. Of course on the other hand it may only hurt you in the end as it comes time to retire and you have not enough money to retire, which means more years of working. It is important to look at the 401k hardship withdrawal at every angle to see the pros and cons.

First of all, what is a 401k hardship withdrawal? This is one of the few times that the government and your employer will allow you retrieve funds from your 401k plan. Hardships withdrawal has special reasons for you taking the money out of your retirement fund, circumstances that require immediate attention and action. They allow you to use the money for making a mortgage payment to dodge a foreclosure on your home. Other problems such as expensive medical bills that are putting you into a huge debt or paying a child’s college tuition; are a few other reasons you could get a 401k hardship withdrawal. Another could be for certain home repairs that are necessary for living conditions. Or unexpected funeral costs and bills. These are just a few of the hardships that qualify you to withdraw funds from your 401k.

Know that when you do withdraw money that there is a penalty that will follow in consequence. There is an additional ten percent tax on the money you retrieve. It works like this, when money is put into your 401k it does not get taxed. When you pull the money out at any time you must pay taxes on it. And if you pull it out early you must pay taxes and on top of that another ten percent tax as penalty. It is important to calculate how much the government will take from your withdrawal before you act.

Sure it sounds great to be able to withdraw money from your 401k due to current financial hardships occurring in your life. But before you pull money out of your retirement plan make sure the pros out weigh the cons.