Writing a Request Letter for a 401k Hardship Withdrawal

Required Information for Requesting 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

401k Hardship Withdrawal Letter Template

[Your Name]
[Your Address]
[City, State ZIP Code]
[Date]

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[401k Plan Administrator’s Name]
[401k Plan Administrator’s Address]
[City, State ZIP Code]

Dear [401k Plan Administrator’s Name],

I am writing to request a hardship withdrawal from my 401k plan account due to [insert reason for the hardship, such as medical expenses, eviction, or home repair]. I need [$ amount] to cover these expenses.


Please find attached [documentation of the hardship, such as medical bills, eviction notices, or repair estimates] to support my request.

I understand that a hardship withdrawal will result in a 10% early withdrawal penalty and that I will need to include the withdrawal as taxable income on my tax return. I also understand that this withdrawal may impact my ability to contribute to my 401k plan in the future.

I have reviewed the guidelines for requesting a hardship withdrawal from our 401k plan and have provided all the necessary information. If there are any additional steps or information needed, please let me know.

Thank you for your prompt attention to this matter.

Sincerely,

[Your Signature]
[Your Name]

Follow-Up on Your Request

After submitting your request letter, follow up with your 401k plan administrator to ensure that they received it and have all the necessary information. The processing time for a hardship withdrawal can vary, so be sure to ask about the timeline for your request.

It’s also a good idea to review your 401k plan’s terms and conditions to understand the impact of a hardship withdrawal on your retirement savings and any potential alternatives, such as a 401k loan.

Conclusion:

A 401k hardship withdrawal can provide financial relief in times of hardship, but it’s important to understand the eligibility criteria and follow the guidelines for requesting one. 

By gathering the necessary information and writing a clear and concise request letter, you can increase your chances of a successful withdrawal. Don’t forget to follow up on your request and review your retirement plan’s terms and conditions to make informed decisions about your financial future.