Hardship Distribution

Key Takeaway

A hardship distribution is available only for immediate and significant financial needs and is taxable. You can withdraw only what’s necessary to cover the expense.

Your plan may allow a hardship distribution if you’re facing an immediate and significant financial need. If approved, the amount you can withdraw is limited to what’s necessary to address the hardship.

What to Expect

  • The distribution is taxable as ordinary income.
  • You will receive a Form 1099‑R, and your withdrawal will be reported to the IRS.
  • If you’re under age 59½, a 10% penalty tax may apply.
  • Hardship distributions cannot be rolled over to another retirement plan.
  • You must keep copies of documents supporting your hardship request in case they are needed later.

Permanent Impact
Hardship withdrawals permanently reduce your retirement balance. They cannot be repaid back into the plan.

Who the Expenses Can Apply To
Eligible hardship expenses may apply to:
  • You
  • Your spouse
  • Your children
  • Your dependents
  • Your primary beneficiary
Common Hardship Reasons
Below are examples of situations often eligible for hardship consideration, along with the type of documentation you should keep for your records.
  • Buying a primary residence: documents such as a purchase agreement and a lender estimate showing the amount needed at closing.
  • Preventing foreclosure: a notice from your lender that includes the amount required to cure the default.
  • Preventing eviction: a notice from your landlord showing the past‑due rent amount.
  • Casualty loss to your home: repair estimates and information from your insurance provider showing any costs not covered by insurance.
  • Funeral expenses: a bill for services related to a parent, spouse, child, dependent, or primary beneficiary.
  • Tuition and related education expenses: a tuition statement for the upcoming school year. These expenses may apply to you, your spouse, your children, your dependents, or your primary beneficiary.
  • Medical expenses: a bill showing the amount owed after insurance. These expenses may apply to you, your spouse, your children, your dependents, or your primary beneficiary.
  • Expenses related to a federally declared disaster: repair estimates and documentation showing that the disaster declaration applies to your primary residence or workplace.

Other Available Withdrawals
Depending on your plan’s rules, you may need to use other available withdrawals before requesting a hardship distribution.

Processing Times
Processing and approval timelines vary based on your plan and the documentation you provide.