What documents do I need to do a hardship withdrawal from the 401k from the seller of the home I'm trying to buy?
Answers | 1
You will need to check with the Administrator of the 401k plan to determine your options regarding a hardship withdrawal - not all 401k plans allow hardship withdrawals. So the first question to ask is" "Does the plan allow hardship withdrawals?" If the answer is "yes", then you need to ask what constitutes a hardship under your plan's rules and what the limits on hardship withdrawals might be. It won't help if you can't take enough out to complete your purchase. The IRS allows hardship withdrawals for:
1) Unreimbursed medical expenses for you, your spouse, or dependents.
2) Purchase of an employee's principal residence.
3) Payment of college tuition and related educational costs such as room and board for the next 12 months for you, your spouse, dependents, or children who are no longer dependents.
4) Payments necessary to prevent eviction of you from your home, or foreclosure on the mortgage of your principal residence.
5) For funeral expenses.
6) Certain expenses for the repair of damage to the employee's principal residence.
If your plan allows hardship withdrawals and follows the IRS rules, then you could withdraw funds to purchase a home. Keep in mind that the withdrawal will be taxable income and if you are under age 59 1/2 will also be subject to the 10% penalty tax. You will also be prohibited from contributing to the plan for six months following the withdrawal. Your Plan Administrator will be able to answer your questions about documentation required to process the withdrawal. Good luck!