Key Rule Summary Purpose Access funds for “immediate and heavy” financial needs IRS Definition Only withdraw what’s required for the expense Common Reasons Medical, tuition, funeral, home repair, eviction prevention Penalty Exceptions Medical costs > 7.5% of AGI, disability, disasters Withdrawal Limit Amount needed to satisfy hardship only Drawback Money isn’t repayable and reduces retirement growth Hardship Withdrawal Covers urgent financial need No, if it qualifies under IRS rules Early Distribution Cashing out before age 59½ Yes — 10% penalty Rollover Distribution Transferring to another plan No Required Minimum Distribution After age 73 No That means a $20,000 hardship withdrawal today could cost you nearly $28,000 in lost earnings by the time you retire — not including taxes or…