Writing a Request Letter for a 401k Hardship Withdrawal

It is generally not allowed to withdraw money from an employer-sponsored retirement account, but there are exceptions. If the employee is faced with serious hardships that affect his or her financial situation, the Internal Revenue Service (IRS) offers provision for hardship withdrawals.

Some employers do not allow such withdrawals, but if an employer does allow it, the employee must write a hardship withdrawal letter that gives the reason with details that he or she needs the money. It is recommended to include documentation that proves the case.

Not An Easy Process

A hardship withdrawal from a 401k is not an easy process. The employee first needs to review the IRS guidelines to determine if he or she qualifies to make a withdrawal. The hardships need to be immediate and very heavy financial burdens.

Some of the main reasons that qualify are:

  1. Medical expenses for the employee or a dependent
  2. Down payment for a primary residence
  3. Mortgage payment to prevent foreclosure of eviction
  4. Educational expenses
  5. Essential house repairs
  6. Funeral expenses

Legal Issues

If the employee qualifies, he or she should review their employer’s plan for hardship withdrawals and ask their supervisor to whom the hardship withdrawal letter should be addressed. Hardship withdrawals from a 401k involve many legal issues, which is why the process can be very strict. These decisions are not made lightly and do not allow frivolous withdrawals.

The company will have its own plan if it allows withdrawals and these plans may be even tougher than federal guidelines. Some plans require proof that the employee tried other means to get the money before requesting a 401k withdrawal.

The withdrawal is also taxable and will have a mandatory 20 percent withholding tax removed from the amount. If the employee’s total income is high, a higher percentage may be removed. There is also a penalty of 10 percent if the employee is under the age of 55.

It is not recommended to request a withdrawal from a 401k because it will have a serious impact on the person’s future gains that the money could have earned.

Immediate Financial Burden

Many people do not think of this because of the immediate financial burden without any other foreseeable option of help. Not only will the person have to pay taxes, pay a penalty and reduce their investment, they may also not be allowed to add to their 401k for 12 months.

Once an employee sends a hardship withdrawal letter, it is recommended to follow up with a phone call after about a week to make sure it was received. It may also be sent by certified mail with a return receipt request.

Repay A Hardship Distribution

The employee is under no obligation to repay a hardship distribution. Since the process of getting hardship money from a 401k is long and involved, the employee should start the process as soon as he or she knows that they are in financial trouble. If they wait too long, it could add to their financial difficulties.

Below is a sample hardship withdrawal letter from a 401k. The writer should use a formal style and make sure it has no spelling or grammatical errors. It should be addressed to the person in charge of the company’s retirement accounts.

The writer should keep copies of all communications that relate to asking for a withdrawal from the account. If there are any documents that prove or support the reason for asking for the withdrawal available, copies of those should also be enclosed with the letter.

Sample 401k Hardship Withdrawal Letter

Your Name
Your Address
City, State, Zip Code


Designated Person’s Name
Designated Person’s Position
Company’s Name
Company’s Address
City, State, Zip Code

RE: Request for a withdrawal from 401k account number NUMBER

Dear Designated Person’s Name:

This letter is a formal request to withdraw ten thousand dollars ($20,000) from my 401k account because of unexpected medical expenses for my wife. The account currently contains fifty-five thousand dollars ($55,000). I have completed and enclosed the required forms for this request.

My wife required emergency surgery for a tumor in her stomach, which turned out to be benign. My health insurance covered the cost of the surgery, but she cannot return to work for three months, during which time our income will be reduced.

If you grant my request, we will have no trouble continuing our mortgage payments and not fall behind, which could result in foreclosure. I have tried to get a loan to cover the expenses, but the interest payments were too much of a burden for our income even when my wife is able to work.

I have included copies of my wife’s medical reports. If you have any questions, you can reach me at Email Address or at Phone Number. Thank you for taking the time to consider my request.


Your Name
List of Enclosures: Proper Forms, Medical Report