Hardship Withdrawal
RetirementGlossary term
Definition
A withdrawal from a 401(k) plan allowed in cases of immediate and heavy financial need, such as medical expenses, preventing eviction, or funeral costs. Subject to income taxes and typically the 10% early withdrawal penalty.
Related terms
- Early Withdrawal PenaltyA 10% tax penalty applied to withdrawals from retirement accounts like 401(k)s and IRAs before age 59 1/2, in addition to regular income taxes. Certain exceptions exist, including first-time home purchases, disability, and substantially equal periodic payments.
- 401(k)A tax-advantaged retirement savings plan offered by employers that allows employees to contribute a portion of their salary before taxes. Many employers offer matching contributions up to a certain percentage.
- Retirement IncomeMoney received during retirement from various sources including Social Security, pensions, retirement account withdrawals, annuities, and investment income. Planning for multiple income streams helps ensure financial security throughout retirement.
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