@TomD8 wrote:
The IRS lists "tuition and related educational expenses" as a valid reason for a hardship withdrawal from a 401K, if allowed by the plan.
401k Plan Hardship Distributions Consider the Consequences | Internal Revenue Service (irs.gov)
Tuition is an allowable hardship to make a withdrawal, but a hardship withdrawal for tuition is not exempt from the 10% penalty for early withdrawals.
The point of a 401(k) is to leave the money until you retire. You can't withdraw money at will, like you can with an IRA. You can only withdraw money if you separate from service (quit, retire or are fired) or if you can prove a hardship. (In addition, 401(k) plans are not required to allow hardship withdrawals at all, but if they do, they must follow certain rules.)
However, getting the money out is a different issue than what kind of tax you pay on the money after you withdraw it. While there is an education exception to the penalty for IRAs, there is no education exception to the penalty for 401(k).
At your link:
However, you should know these consequences before taking a hardship distribution:
- The amount of the hardship distribution will permanently reduce the amount you’ll have in the plan at retirement.
- You must pay income tax on any previously untaxed money you receive as a hardship distribution.
- You may also have to pay an additional 10% tax, unless you're age 59½ or older or qualify for another exception.
- You may not be able to contribute to your account for six months after you receive the hardship distribution.
Check the linked list of exceptions.
