Hardship Withdrawal Definition

Many term deposits-particularly workplace savings accounts such as 401(k) accounts-offer reduced penalties for early withdrawal if the withdrawal is made for a bona fide hardship; the specific plan will define what is considered a hardship (unfortunately, a much-needed vacation to Hawaii does not qualify). Withdrawn funds cannot be later replaced in the fund and are usually subject to some type of penalty and definitely will have tax implications. Because of the penalties, a hardship withdrawal should be considered an option of last resort.