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I am in my 30s and was recently laid off. I have $50,000 in a pension account with my former employer. Can I withdraw the money to pay my mortgage without paying a penalty.
-C. Levine, Via the Internet
I’m sorry to hear about your circumstances. If your pension plan is a traditional defined benefit plan, you may face some restrictions. You should check with your former employer and ask for a copy of the Summary Plan Document.
If you have a defined contribution plan, such as a 401(k), you should be eligible for a hardship withdrawal. Such withdrawals are generally permitted when expenses are deemed to be immediate and significant. Typical scenarios involve the need for funds to meet certain medical expenses and payments to prevent eviction from, or foreclosure on, a principal residence.
A hardship waiver will allow you to avoid the 10% penalty that would normally be assessed for withdrawing the funds prior to age 591/2. However, there is no way to avoid the tax man. Because the funds were contributed pre-tax, you’ll have to pay taxes upon their withdrawal.
To learn more about hardship withdrawals from various retirement plans, I suggest taking a look at the FAQ pages on the “Retirement Plans Community” section of the IRS Website, www.irs.gov.