Business and Personal Finance Dictionary

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• HARDSHIP WITHDRAWAL
  
  A hardship withdrawal occurs when you are allowed to take out some or all of your 401(k) money to meet certain financial needs. You qualify by meeting the conditions your plan imposes, which typically ask you demonstrate the urgency of the situation and your need for the money. Among the allowances the IRS makes for hardship withdrawals are purchasing your primary house, covering out-of-pocket medical expenses for you or a dependent, or paying college tuition for you or a dependent. However, if you're younger than 59 1/2, you must pay a 10% penalty plus income tax on the amount you withdraw, and you may not be able to contribute to the plan again for a year or more.
  
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