Writing a Request Letter for a 401k Hardship Withdrawal

A 401k plan is a retirement savings account offered by many employers. It allows employees to save a portion of their income on a pre-tax basis, which can grow tax-free until retirement. 

However, there may be times when an employee needs to withdraw money from their 401k before retirement due to financial hardship. In such cases, a 401k hardship withdrawal can be requested. This article will guide you on how to write a request letter for a 401k hardship withdrawal.

Understand the Eligibility Criteria

Before writing the request letter, it’s essential to understand the eligibility criteria for a 401k hardship withdrawal. The Internal Revenue Service (IRS) allows hardship withdrawals only for specific reasons, including:

1. Unreimbursed medical expenses for the employee, their spouse, or dependents
2. Purchase of a primary residence
3. Payment of tuition, room, and board expenses for the next 12 months of post-secondary education for the employee, their spouse, or dependents
4. Prevention of eviction or foreclosure on the employee’s primary residence
5. Burial or funeral expenses for the employee’s deceased parent, spouse, children, or dependents
6. Expenses for the repair of damage to the employee’s primary residence that would qualify for the casualty deduction under Section 165 of the Internal Revenue Code

Gather Required Information

To write a request letter for a 401k hardship withdrawal, you’ll need to gather the following information:

1. The reason for the hardship withdrawal
2. The amount of money needed and how it will be used
3. Documentation of the hardship, such as medical bills, eviction notices, or repair estimates
4. Your 401k plan administrator’s contact information and withdrawal procedures

Follow the 401k Plan Administrator’s Guidelines

Each 401k plan has its own guidelines for requesting a hardship withdrawal. It’s crucial to follow these guidelines and include all the necessary information in your request letter. Failure to do so may result in a denial of your request.

Writing the Request Letter

When writing the request letter, be sure to include the following information:

1. A clear explanation of the reason for the hardship withdrawal
2. The amount of money needed and how it will be used
3. Documentation of the hardship, such as medical bills, eviction notices, or repair estimates
4. Your 401k plan administrator’s contact information and withdrawal procedures
5. A statement acknowledging that you understand the tax consequences of a hardship withdrawal, including a 10% early withdrawal penalty and the need to include the withdrawal as taxable income on your tax return
6. Your signature and date