Optimal Finance Daily - Financial Independence and Money Advice 3255: Should You Take a Hardship Withdrawal? by Cynthia Meyer with Financial Finesse on Tax Advice
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Aug 21, 2025 Tapping into your retirement funds through a hardship withdrawal can be risky. It comes with heavy tax penalties and may jeopardize your long-term financial growth. Cynthia Meyer emphasizes treating such withdrawals as a last resort. Before making this decision, consider alternatives like borrowing from a Roth IRA or selling assets. Proper financial planning is crucial, especially when navigating strict IRS rules. It's essential to remember: just because you can withdraw funds doesn't mean you should.
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Hardship Withdrawals Are Last Resort
- Avoid using a hardship withdrawal unless it's a true last resort for an urgent financial crisis.
- Remember you'll pay income tax and usually a 10% penalty under age 59½, so calculate the full cost before withdrawing.
Only For Immediate, Severe Needs
- Confirm the need must be paid immediately before withdrawing from retirement.
- Use hardship withdrawals only to prevent eviction, foreclosure, or urgent medical needs.
Explore Other Funding First
- Exhaust other funding sources before touching retirement accounts.
- Sell non-retirement investments, withdraw Roth IRA contributions, or consider home equity or personal loans first.