Your, or your family’s, Hurricane Sandy hardship may qualify for 401(k) withdrawal
Happy New Year 2013!
It’s something called the “401(k) hardship distribution.” But you must act by February 1st.
In response to Hurricane Sandy, the IRS liberalized what are known as “hardship withdrawal” rules for victims who had losses resulting from Sandy. Under the relief, 401(k) plans allow participants to take out money until February 2013.
The IRS has said 401(k) plans and similar employer-sponsored retirement plans allow you to take out loans or hardship distributions if you are a victim of Hurricane Sandy or members of victims’ families.
What isn’t well-known is that even a person who lives outside the disaster area can take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent, or other dependent living or working in a Sandy-affected region.
To qualify, hardship withdrawals must be made by Feb. 1, 2013.
Employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, as well as state and local government employees with 457(b) deferred-compensation plans, may also be eligible to take advantage of streamlined loans and liberalized hardship distribution rules, according to FINRA, the Financial Industry Regulatory Authority (www.finra.org).
Generally, we’re not allowed to take money out of a 401(k) plan while still employed and before reaching age 59½ years. If we do take money early, we pay a 10 percent penalty. There are, of course, exceptions such as death, divorce, or disability.
However, if your plan provides for hardship distributions, and you can show that you have an immediate need, you may be entitled to funds. State disaster areas are eligible, and President Obama declared emergencies in certain cities as well.
Read more at the Philly Inquirer’s website: http://www.philly.com/philly/business/20130101_Your_Money__Sandy_hardships_may_qualify_you_for_401_k__withdrawals.html#ixzz2Gpji8BeC