A 401(k) hardship withdrawal can feel like the cleanest solution to an ugly money problem. The account already has cash, the expense feels urgent, and the paperwork may look easier than finding another source.
But retirement money comes with strings attached. A hardship distribution permanently reduces the account balance, generally creates taxable income on previously untaxed money, and may trigger the 10% additional tax before age 59½ unless an exception applies. Your plan also has to permit hardship distributions and follow its own rules.
