Keep in mind that a 401k is a retirement plan! It is intended for your retirement. So the IRS has designed the 401k withdrawal rules to make it hard for you to use the money for other purposes.

Normal withdrawals may begin after age 59 1/2. Normal income tax applies to these withdrawals.

It is possible to make a 401k hardship withdrawal. A hardship withdrawal is not a 401k loan. You cannot repay the money. The withdrawal will be subject to taxes, and possible penalties.

There are two types of 401k hardship withdrawals. The first is a financial hardship withdrawal. This type of hardship withdrawal is subject to income taxes and also 10% 401k early withdrawal penalties if you are under 59 1/2.
Some reasons you might be able to take a financial hardship withdrawal:
*To purchase a primary residence.
*To avoid foreclosure on or eviction from your primary home.
*To pay for college tuition that is dues within 12 months for you or a dependent.
*To pay medical expenses for you or a dependent that will not be reimbursed.
*To pay for funeral expenses.
*For repair of primary residence.

The second is a penalty-free withdrawal. This is also subject to income taxes, but there is no penalty.
Some reasons you might be able to withdraw money from your 401k penalty-free:
*If you become completely disabled.
*Debts from medical expenses are in excess of 7.5 percent of your adjusted gross income.
*You ordered by a court to surrender money to a former spouse, child, or dependent.
*You leave your job by being laid off, fired, quitting, or retiring early, and you are 55 or older, or it is within the year that you turn 55.
*You leave your job and set up a schedule of payments for roughly equal payments to last through your life expectancy. These payments must continue for at least 5 years or until you reach age 59 1/2 (whichever is longer).

Your employer is not required to offer either type of hardship withdrawl. So you will need to talk to your employer to find out if one of these is available to you.


(Click image to see this book at Amazon.com)
IRAs, 401(k)s & Other Retirement Plans: Taking Your Money Out by Twila Slesnick PhD