How to Take a Hardship Withdrawal from Your 401(k)

If you’re facing a serious financial emergency, your 401(k) plan may allow you to take a hardship withdrawal. While tapping your retirement savings should be a last resort, understanding the rules can help you make an informed decision.

Recent changes under SECURE 2.0 allow for self-certification of your financial need, making the process easier in plans that adopt this option.

A hardship withdrawal lets you permanently remove money from your 401(k) to meet an immediate and heavy financial need. Unlike a loan, you don’t repay the money—but you may owe taxes and penalties, and the withdrawal reduces your retirement savings.

The IRS allows hardship withdrawals for specific reasons, including:

• Medical expenses for you, your spouse, or dependents

• Costs related to buying a principal residence

• Tuition, room and board, and educational fees for the next 12 months

• Payments needed to prevent eviction or foreclosure

• Funeral expenses

• Certain expenses to repair damage to your primary residence

Your plan must allow for hardship withdrawals, and you can only take out the amount necessary to meet the need (including taxes). Many plans require that you exhaust all other withdrawal options before taking a hardship. Check your plan's Summary Plan Description or check with NestEggs to confirm these requirements.

Thanks to the SECURE 2.0 Act, if your plan allows it, you may now self-certify that:

1. You have an immediate and heavy financial need, and

2. The amount you’re withdrawing doesn’t exceed what you actually need

This means you no longer have to provide receipts, bills, or documents upfront to your plan administrator—just your attestation that the hardship reason and amount are legitimate.

Important: Not all plans offer self-certification. Check with NestEggs to confirm.

1. Log in to your 401(k) portal
   Navigate to the “Manage” section and select "Withdrawal Request".

2. Select the hardship reason
   Choose from the IRS-approved categories.

3. Provide self-certification
   If your plan allows it, you will be asked to check a box and sign a statement confirming:

   • You meet the conditions for a hardship

   • You’re not withdrawing more than you need

4. Submit your request
   Complete your withdrawal request form and e-Sign via DocuSign.

5. Review and monitor
   Funds are typically sent by direct deposit or check within 1–2 weeks.

• Taxable: Hardship withdrawals are subject to federal and state income tax

• Penalty: If you’re under age 59½, a 10% early withdrawal penalty may also apply

• No repayment: The money you withdraw cannot be returned to your account

Check with NestEggs about optional tax withholding or consult a tax advisor to plan for year-end taxes.

Yes. Previously, hardship withdrawals required a 6-month suspension of contributions. That rule was eliminated in 2019. You can continue making contributions after your withdrawal, unless your specific plan states otherwise.

• Confirm your plan allows hardship withdrawals and self-certification

• Review your financial need against the IRS-approved categories

• Decide on the amount you need (plus taxes, if applicable)

• Complete self-certification

• Understand tax and long-term savings consequences

Taking a hardship withdrawal is a serious decision. Use it only when necessary, and talk to a financial advisor if you need help weighing your options.