Hardship Withdraws When Times Are Bad

All of us fall on hard times some where in your life. When I was in my twenties, a coworker in his 50s told me that God mapped out a plan for all of us. He said that we will have so many days of good times, so many days of bad times, and so many days when we wish we never came here.





So what happens when you have been out of work for a year? You will probably have a lot of bills to get caught up on. You just started back to work. You have no money, your mortgage or rent is due and the children need shoes? You look at your IRA with $20,000 in it but you know at age 40, you would take a big hit in taxes and penalties if you withdraw that money. Do you know that you may qualify for an IRA Loan?

The first thing you must do is familiarize yourself about the IRA withdrawal rules of the IRS and of your IRA Host Program. This is crucial. While Individual Retirement Accounts (IRAs) are created to be distributed after becoming 59 ½ years of age, you may qualify for special cases and instances that will allow hardship loans due to severe financial difficulties. The good news is that for most IRA accounts, there is always an exception that permits you to procure money out in specific bad luck circumstances. These distributions are governed by the IRA hardship withdrawal rules, which may or may not allow you to take funds without reimbursing a ten percent penalty on the money.

For example, your retirement account might only permit you to pay for new home loan expenses. Thus, if you need funds for your child’s college education, you will not be able to take money from your retirement plan without receiving a ten percent penalty from the IRS.



Once you know the qualified rules for an IRA Withdrawal, you should learn about the process that your provider has to carry out for your request. Every provider has their own set of procedures for accepting and approving a hardship withdrawal. They may ask you to write a letter about your situation with a few attachments as proof of your hardship. Some companies ask you to completely fill out a special form with notarization. They may ask that you send in the form to the firm by mail or by fax. You should determine how much money you need to withdraw from your IRA before you make your request.



Last, make sure you set up a plan to pay your IRA back over time. Usually, you pay the money back with interest to yourself not to your IRA provider.