You can, however, avoid this sanction if you make an IRA hardship withdrawal. Some are withdrawing $10,000 to $50,000 but are not affected financially, nor have they had the virus. Which is right for you? Unlike a 401(k) loan, the funds to do not need to be repaid. Among the people who can skip them are those who would have had to take the first distribution by April 1, 2020. If a 457(b) plan provides for hardship distributions, it must contain specific language defining what constitutes a distribution on account of an … When taking a hardship withdrawal, the funds will be subject to income tax, and you may also need to pay a 10% early withdrawal penalty if you are under age 59 1/2. The Thrift Savings Plan (TSP) has made a temporary change to the TSP’s financial hardship withdrawal rules for TSP participants affected by Hurricanes Harvey, Irma or Maria that occurred during August and September 2017 and victims of the California Wildfires that occurred during September through November 2017. This is where the reader’s comments and question come in: “I am aware of ineligible people using the coronavirus hardship withdrawal. Hardship withdrawals don't qualify for an exception to the 10% early withdrawal penalty unless the employee is age 59½ or older or qualifies for one of the exceptions listed above. Generally, taking a withdrawal from an IRA or 401(k) prior to age 59 1/2 triggers a 10% penalty on the sum you remove. Under normal circumstances, you cannot withdraw money from your traditional individual retirement account (IRA) without facing a penalty tax until you reach age 59.5. The IRS has released guidance on the CARES Act for taxpayers tapping their retirement funds as a result of the COVID-19 pandemic. Normally, taking an early distribution withdrawal from your 401(k) or IRA means you’d pay a 10% penalty. Thanks to the new hardship withdrawal designation, you don’t have to forfeit the $1,000 if you’re an eligible person. For example, if you took out $10,000, you’d actually lose $1,000 to the penalty. A hardship withdrawal from a 401(k) retirement account can help you come up with much-needed funds in a pinch. For many, 401(k) loans are a better option than early withdrawals. Consequences of Taking a Hardship Withdrawal. These include a 401(k) or 403(b) plan, as well as an IRA. This means that the amount of the withdrawal … In fact, they … The rules for hardship distributions from 403(b) plans are similar to those for hardship distributions from 401(k) plans. Here's how that guidance may impact your choices. 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