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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308782  
Subject: Re: Big Dilemma, no income, debt, IRA- need fact Date: 6/27/2012 3:36 PM
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Perhaps this has changed, but when I had my first 401k, it was an option to remove money without penalty for first house purchase and HARDSHIP.

Has that changed? Wouldn't this qualify as hardship if still an option?


Sorry, it hasn't changed, but for 401(k)s there hasn't ever been a penalty exception for either home purchases or hardship. The law does require that plans set rules dictating whether or not you can withdraw at all (not all plans allow withdrawals). Under the law, things like hardship, preventing your home from being foreclosed on, or purchasing a home can be allowable reasons for withdrawals, so that may be where the home purchase and hardship rules you are thinking of came from. Here is a link to an IRS tax topic that lists the exceptions for 401(k) plans: http://www.irs.gov/taxtopics/tc558.html Here is an article that provides more information about what 401(k) withdrawals are allowed for: http://www.401khelpcenter.com/401k_education/hardship_withdr...

However, since the OP has already rolled the money over into an IRA, the 401(k) rules aren't the applicable rules anyway - the IRA rules are.

Unfortunately, IRA exceptions for penalties http://www.irs.gov/taxtopics/tc557.html don't include hardship, either. They do include medical expenses (unfortunately, not for the cat's expenses), with some caveats, so the OP may have some exemption from the penalty, but would still owe the taxes on any withdrawals. IRS Pub 590 http://www.irs.gov/pub/irs-pdf/p590.pdf has more details.

Having read through this thread, I will say, it is very concerning to me that the 57 YO OP has only $4,300 towards retirement, and is apparently going to have to tap that for living expenses. Unfortunately, I didn't have any additional advice to add to what has already been said, namely -

- Get a job, any job
- Figure out how to cut expenses
- sell or give away EVERYTHING that's in the garage

I am concerned that if nothing changes, once the OP runs through the $4,300 (3 months max, at the burn rate of $1,600/month) there isn't anything left, which means she's going to be homeless in 3 months, plus however long eviction proceedings take in her state (a few days after eviction, whatever's in the garage is going to be sold or tossed, too). And another few months after that, she is going to be on the hook with the IRS for taxes that she has no money for.

AJ
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