Bowyn, you may qualify for a hardship exemption, in which case, the amount you take out of the 401K will be added to your gross income for this year and, taxed accordingly but, you won't loose that additional 10%.
The IRS code that governs 401k plans provides for hardship withdrawals only if: (1) the withdrawal is due to an immediate and heavy financial need; (2) the withdrawal must be necessary to satisfy that need (i.e. you have no other funds or way to meet the need); (3) the withdrawal must not exceed the amount needed by you; (4) you must have first obtained all distribution or nontaxable loans available under the 401k plan; and (5) you can't contribute to the 401k plan for six months following the withdrawal.
Under the provisions of the Pension Protection Act of 2006, the need of the employee also may include the need of the employee's non-spouse, non-dependent beneficiary.
The following items are considered by the IRS as acceptable reasons for a hardship withdrawal:
Unreimbursed medical expenses for you, your spouse, or dependents.
Purchase of an employee's principal residence.
Payment of college tuition and related educational costs such as room and board for the next 12 months for you, your spouse, dependents, or children who are no longer dependents.
Payments necessary to prevent eviction of you from your home, or foreclosure on the mortgage of your principal residence.
For funeral expenses.
Certain expenses for the repair of damage to the employee's principal residence.*
Hardship withdrawals are subject to income tax and, if you are not at least 59½ years of age, the 10% withdrawal penalty. You do not have to pay the withdrawal amount back.
A hardship distribution may not exceed the amount of the need. However, the amount required to satisfy the financial need may include amounts necessary to pay any taxes or penalties that may result from the distribution.
More details here:
http://www.401khelpcenter.com/hardships....GOVfI1lTZg
So, yes you probably could take enough to pay your rent for say the next 18 months, to be safe plus anything your ex (since you are still legally partners for this tax year) has in outstanding medical bills and, only pay taxes on that much.
That still won't get food, the vehicle I know you need or, much else. To manage that. yo'd have to take the added 10% penalty as well.
You might be able to take only what you need under hardship now, and hold off until 2013 for the rest, thus putting a lot of it on a year where your gross income will be a lot lower, and you'll pay a lower percentage on taxes. Maybe use the business card for food and what you need that isn't covered under hardship now, then pay it off come 2013 when it won't be so hard on taxes. Yeah still no vehicle until 2013, but if you can manage that, it might help keep a bit more of it in your pocket.
Yes I know it's a lot of number crunching, credit card interest for now vs. taxes and the 10%, guesstimated 2013 gross, and what bracket you will be in then and such. Then deciding how long you can subsist without anything beyond the hardship stuff.
Just DO NOT pull it all, then put any part of it into a tax differed IRA until your DP is legally dissolved. Even if it's all in your name only, he could claim he paid into the IRA, and make that mess even bigger. Mine did that to me on one of mine. I had the documentation to prove him wrong, but still it's one more potential hassle you don't need.
401K - cashing out, penalties?
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Virgo
