A hardship withdrawal from a 401(k) is an early withdrawal that you might be able to take to cover specific expenses. It is an authorized withdrawal, meaning the IRS can waive the 10% early withdrawal penalty. A hardship withdrawal is an emergency removal of funds from a retirement plan, sought in response to what the IRS terms "an immediate and heavy financial need". It is actually up to the individual plan administrator whether to allow such withdrawals or not. Many major employers do this, provided that employees meet specific guidelines and present evidence of the hardship to them.

Here are some key points to keep in mind about hardship withdrawals from a 401(k):

• A hardship withdrawal is for large, unexpected expenses.
• The funds need not be repaid, but you must pay taxes on the amount of the withdrawal.
• A hardship withdrawal can give you retirement funds penalty-free, but only for specific qualified expenses such as crippling medical bills or the presence of a disability.
• Hardship withdrawals must be for the amount "necessary to satisfy the financial need".
• Hardship withdrawals are taxable events, and your 401(k) plan administrator will withhold a mandatory 20% from the amount requested.
• The conditions under which hardship withdrawals can be made from a 401(k) plan are determined by the provisions in the plan document, as elected by the employer.
• Your employer may also limit the uses of such distributions, such as for medical or funeral costs, as well as require documentation.

Its important to note that a hardship withdrawal from a 401(k) should be a last resort. There are several downsides to consider, such as taxes and penalties, and the potential loss of retirement savings. Before considering a hardship withdrawal, its a good idea to explore other options, such as an emergency fund or a 401(k) loan.