As of 2026, the specific, expedited CARES Act COVID-19 hardship withdrawals are generally no longer available, as that relief was temporary. Individuals facing financial difficulty must now rely on standard hardship withdrawal rules, such as immediate and heavy financial needs like medical expenses, preventing eviction, or funeral costs, which are subject to plan rules and potential tax penalties.
Section 2022 of the CARES Act allows people to take up to $100,000 out of a retirement plan without incurring the 10% penalty. This includes both workplace plans, like a 401(k) or 403(b), and individual plans, like an IRA. This provision is contingent on the withdrawal being for COVID-related issues.
Financial hardship means a material reduction in income or material increase in living expenses associated with the coronavirus pandemic that has created or increased a risk of mortgage delinquency, mortgage default, foreclosure, loss of utilities or home energy services, or displacement for a homeowner.
A 401(k) hardship withdrawal is an early withdrawal for an "immediate and heavy financial need," typically for IRS-defined reasons like major medical expenses, funeral costs, tuition, preventing eviction/foreclosure, major disaster losses, or buying/repairing a principal residence, but it's taxed and often incurs a 10% penalty if you're under 59½, though some disaster/medical situations may avoid penalties.
Even if an employer does not treat a distribution as coronavirus-related, a qualified individual may treat a distribution that meets the requirements to be a coronavirus-related distribution as coronavirus-related on the individual's federal income tax return. See section 4.
The federal Public Health Emergency for COVID-19 expired on May 11, 2023. Preventing the spread of COVID-19 remains a public health priority.
Here are some of the common distribution mistakes you'll want to avoid as you enter retirement:
Using the loan to pay off credit card debt may not meet the hardship criteria set by some plan administrators, as hardship withdrawals are generally restricted to specific circumstances defined by the IRS, including: Medical expenses. Costs related to purchasing a primary residence. Tuition and educational fees.
I am experiencing financial hardship, and I am unable to pay my mortgage in full because of one or more of the following: 1. Significant loss of household income during the COVID-19 pandemic.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides the Economic Development Administration (EDA) with $1.5 billion for economic development assistance programs to help communities prevent, prepare for, and respond to coronavirus.
Under the CARES Act, borrowers are entitled to request an initial forbearance of their monthly mortgage payments for up to 180 days, and may request up to an additional 180 days. be paid back over time. Servicers should educate the borrower on what options will be available to the borrower to make repayments.
New 401(k) rules, largely from the SECURE 2.0 Act, ease early withdrawals for emergencies, domestic abuse, and natural disasters; allow penalty-free access for long-term care needs (effective Jan 2026); and increase Required Minimum Distribution (RMD) age to 73 (moving to 75 in 2033). Key changes include a $1,000 emergency withdrawal once yearly, expanded domestic abuse exceptions (up to $10k), and RMDs on Roth 401(k)s are eliminated, mirroring Roth IRAs.
The CARES Act expired on March 27, 2022 including the bankruptcy-related amendments. As a result of the expiration of the CARES Act, Official Forms 101, 122A-1, 122B-1, 122C-1, and 201 have reverted back to the pre-CARES Act versions. The forms can be found here.
Acceptable 401(k) hardship withdrawal reasons, defined by the IRS as "immediate and heavy financial needs," generally include major expenses like medical care, costs to purchase or repair a principal residence (preventing eviction/foreclosure), tuition/education fees for up to 12 months, and funeral/burial costs for a family member, plus certain disaster-related expenses. However, these distributions are taxable and reduce retirement savings, so always check your specific plan's rules and consider the long-term impact.
APR range: 11.69%-35.99%. Loan amounts: $1,000-$50,000. Minimum credit score: 560.
A hardship withdrawal would be denied if your employer doesn't allow them or if you don't submit enough documentation to prove that you urgently need financial help. It might also be denied if you don't have adequate funds in your retirement account to cover your emergency.
People do this for many reasons, including: Unexpected medical expenses or treatments that are not covered by insurance. Costs related to the purchase or repair of a home, or eviction prevention. Tuition, educational fees and related expenses.
The "240,000 rule" (or $1,000-a-month rule) is a retirement guideline suggesting you need $240,000 saved for every $1,000 of monthly income you want in retirement, based on a 5% annual withdrawal rate ($240,000 x 0.05 = $12,000/year or $1,000/month). It's a simple way to estimate savings needs, but it doesn't account for inflation, taxes, market volatility, or other income sources like Social Security, making it a starting point, not a complete plan.