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Asked 11/19/2010

Can I take a hardship withdrawal from my 401K to pay for my son's sober living house and my other son's college living expenses?

I need to help pay for one son's sober living house room & board & my other son's college expenses. Does this qualify under the IRS rules of hardship withdrawal?

 
 
 
 
 
Answers

Answer 1/5 - Submitted 11/19/2010

Yes, if both son's are no longer dependents and the sober living house is considered a medical necessity that health insurance won't cover. Read this link for more info
http://www.401khelpcenter.com/401k_education/hards hip_withdrawal_article.html

 
 

Answer 2/5 - Submitted 11/20/2010

The IRS doesn't define a "hardship withdrawal." It allows employers to define a hardship under the 401(k) plan.

Qualifying to take money out of a 401(k) for "hardship" doesn't necessarily get you out of the 10% early distribution penalty. A tax professional would need to know more about your financial situation and the ways you spent the money before giving a definite answer.

 
 

Answer 3/5 - Submitted 11/20/2010

When I contacted Fidelity Investments to begin the paperwork process, they felt my son's sober living house expenses qualified under the non-reimburses medical expenses, however, when I contacted my HR retirement department with questions, the person I spoke with said she doubted this qualified under the IRS guidelines and it's up to the IRS, not the employer. I'm frustrated and confused.

 
 

Answer 4/5 - Submitted 11/20/2010

Thing is, if your son who needs help with the sober living facility costs is not eligible to be listed on your tax return as a dependent, you can't claim his medical expenses as a deduction, either. You wouldn't be taking a hardship withdrawal for your needs, as this would not be your hardship, but your son's. You'd in effect be taking a withdrawal to fund a gift to help another individual.

 
 

Answer 5/5 - Submitted 11/20/2010

"Hardship" is decided by the 401(k) plan.

"Qualifying medical" is decided by the IRS. They have a publication devoted to that subject -- http://www.irs.gov/pub/irs-pdf/p502.pdf . To be of help to you, tax-wise, this would also have to exceed 7.5% of your income.

 
 
 
 
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