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High Yield Money Market

High Yield Money Market

What is a High Yield Money Market?
A high yield money market is a type of savings account that promises its holder a high rate of return, when compared to other savings investments. High Yield Money Markets are investment vehicles, offered by commercial banks and credit unions to lure investors and account holders. These accounts are designed to balance the desire for conservative investment with the ability to generate an increased rate of return. Although the name suggests a significant rate of return, high yield money market accounts typically do not provide interest payments higher than 5.5%.
A High yield money market fund is an open-ended mutual fund which invests primarily in short-term debt securities such as commercial paper and US Treasury bills. High Yield money market funds will utilize a more aggressive investment approach—these funds will invest in short-term debt securities who exhibit higher rates of return. 
A money market account is a form of savings offered by commercial banks and credit unions. They operate as regular savings accounts. The primary difference between a regular savings account and a high yield money market is that they typically offer higher interest payments and have higher minimum balance requirements. Moreover, a high yield money market will typically limit a holder to six withdrawals per month. Finally, another fundamental difference between the savings vehicles is that, similar to a checking account, a high yield money market account will allow its holder to write up to three checks per month against the account. 
Are my Funds Insured?
Similar to bank accounts, the funds stored in a High Yield Money Market are insured by the Federal Deposit Insurance Corporation. If the bank or credit union goes insolvent, the money will remain intact. The Federal Deposit Insurance Corporation is an independent agency of the United States Federal Government that was formed in 1933 in response to the great depression and the thousands of bank failures that resulted. Since the formation of the FDIC, not one person has lost funds in a credit union or bank that was insured by the agency. The funds stored in a High Yield Money Market offered by a credit union will be protected by the national Credit Union Administration—also a federal agency. 
Examples of Interest Payments in High Yield Money Markets:
Each bank and credit union will offer different yields on their money market accounts. These rates of return will also fluctuate based on the amounts held in the account; in general, the more money held in the account the higher the rate of return.
• For investments of Under $2,500 the attached interest rate will be approximately 2.5%
• For investments between $2,500 and $9,999 the attached interest rate will be approximately 4.5%
• For investments between $10,000 and $24,999 the attached interest rate will be approximately 5%
• For investments between $25,000 and $49,999 the attached interest rate will be approximately be 5.5%

Stafford Loan

Stafford Loan

What are Stafford Loans?
A Stafford loan is a type of student loan, offered to eligible students enrolled in American colleges, universities or other accredited institutions of higher education to help finance the education endeavor. The loan’s terms are outlined in Title IV of the Higher Education act of 1965, which pledges repayment to the lender if the student defaults on his/her payments or promise to pursuit an academic degree. 
Stafford loans are delivered and regulated by the William D. Ford Federal Direct Loan Program. The United States government provides these low-interest loans to eligible students in order to cover the costs associated with enrolling in a four-year university, college, community college, trade, technical or career school. Those students deemed eligible for the Stafford loan program will borrow directly from the United States Department of Education at participating universities or institutions of higher education.
Because Stafford loans are guaranteed by the faith of the United States Government, the financing is provided at lower interest rates when compared to loans offered by private institutions. These lower interest rates; however, are met with more stringent eligibility requirements and borrowing limits placed on Stafford loans.  
Types of Stafford Loans
Direct Subsidized Loans: This type of Stafford loan is provided to students with financial needs. A student’s school will review the results of their Free Application for Federal Student Aid and evaluate the amount the individual can borrow. The student will not be charged interest during deferment and grace periods. 
Direct Unsubsidized Loans: This type of Stafford loan does not require the student to demonstrate a financial need. Similar to subsidized loans, the student’s school will evaluate the amount the student can borrow. With a direct unsubsidized loan, interest will accumulate from the time it is first paid out. The student may pay the interest while in school and during grace, deferment or forbearance periods or the student may allow interest to accrue and be capitalized. If the student chooses to not pay interest as it accumulates, the total amount owed will increase because the student will be charged interest on the higher principal amount. 
How do I Apply for a Stafford Loan?
To secure a Stafford loan you must complete the Free Application for Federal Student Aid. The majority of students file the Free Application for Federal Student Aid via the Internet to submit their application. Schools will use the information from your application to determine how much aid you are eligible to receive. Stafford loans are typically included as part of the award package, which will contain other types of aid to help fulfill the costs of enrolling in college or career school.
When you are first awarded a Stafford loan, you must complete a Master Promissory Note–a legal document where you will promise to fulfill the repayment obligations of the loan and any accrued interest or fees attached to the loan. Moreover, the Master Promissory Note will explain the terms and conditions of the loan. In the bulk of instances, a Master Promissory Note can be used for loans that a student receives over several years of study. If a student previously signed a Master Promissory Note to receive a program loan, they will need to file and sign a new Master Promissory Note for a direct loan. 
How Much Money Can I Borrow?
A Stafford Loan has limits; the maximum amounts you are eligible to receive are capped for each academic year and in total. These caps will be elucidated below. The actual loan amount you can borrow per year will depend on your year in school, whether you are classified as a dependent or independent student and other factors. These factors may diminish the loan amount below the maximum amounts listed below.
You may be eligible—depending on your financial need– to receive a subsidized loan package for an amount up to the annual borrowing limit for your particular level of study. If you come across education expenses that are not fulfilled by subsidized loans and other forms of aid, you may receive an unsubsidized loan so long as you do not exceed the combined subsidized and unsubsidized annual limits. 
Annual and Aggregate Loan Limits for Stafford Loans:
First Year Stafford Loans: 
• $5,500 for dependent undergraduate students
• $9,500 for Independent Undergraduate students
• $20,500 for Graduate and Professional Degree students
Second Year:
• $6,500 for dependent undergraduate students
• $10,500 for Independent Undergraduate students
• $20,500 for Graduate and Professional Degree students

Maximum Total Debt Allowed from Student Loans When You Graduate:
• $31,300 (No more than $23,000 of this total may be found in the form of subsidized loans) for dependent undergraduate students
• $57,500 for Independent Undergraduate students
• $138,500 for Graduate and Professional Degree students
Note: the limits listed above are the maximum annual amounts you can borrow in both unsubsidized and subsidized forms. You may secure one type of loan or a combination of the two. Because you are not allowed to borrow more than the cost of admittance minus any other financial aid you will receive, you may receive less than these amounts. 
How is the Money Delivered to Me?
If you are deemed eligible by the United States government to receive a Stafford loan, you will be paid by your school, in at least two installments. An installment may not exceed one-half your total loan amount. Your academic institution will use the loan money to fulfill tuition costs and other fees (such as room and board). If any funds remain, you will be awarded the monies by check or other means. For first-year undergraduate students and first-time borrowers, your academic institution will not disburse your first payment until 30 days after the first day of your enrollment date. 
Stafford Loans: Interest Rates
Undergraduate Students: If your first disbursement of a subsidized loan is delivered between July 1, 2011 and June 30, 2012 the attached interest rate will be fixed at 3.4%. This rate is fixed at 6.8% for the same dates for Graduate and professional degree students. 
Direct Unsubsidized Loans: The attached interest rate is fixed at 6.8% for every borrowers (both undergraduates and graduate students). 

Subsidized Loan

Subsidized Loan

What is a Subsidized Loan?
A subsidized loan is a type of loan where the borrower is not required to pay interest. With a subsidized loan the attached interest is paid by another party. 
Interest is typically placed on a loan in the form of periodic payments according to the loan’s annual percentage rate. Interest payments do not diminish the principal amount, but instead, simply serve as a fee for borrowing. 
Any party may subsidize a loan. Depending on the type of financing, the subsidizing party may be a government agency, a non-profit organization or a private institution. The United States Government, for example, will pay the interest attached to student loans in a subsidized Stafford Loan program. 
How do I Qualify for a Subsidized Loan?
Depending on the issuer of your loan, you will need to qualify to be free from interest payments. A number of housing loans (such as the first time home buyer loans) will require you to live in a certain area and ear below a specific dollar amount to be ruled free from interest obligations. Moreover, a student loan may be subsidized if you demonstrate a financial need; this need must be affirmed based on your income and resources compared to the cost of attending a graduate or post-graduate school of higher learning. 
In addition to demonstrating a financial need for a subsidized student loan, you must meet other criteria; a loan may only be subsidized while you are:
• Enrolled at least half time
• During a grace period
• During qualified deferment periods
Once you are ruled ineligible to meet the above criteria, interest will accumulate on your loans. 
Subsidized Student Loans:
A subsidized student loan is a type of loan where the government responsible for issuing the loan will pay the interest while the student remains active in a qualified university or college. In a subsidized student loan agreement the attached interest obligation is erased by the underlying government body. 
A subsidized loan is often confused with a student loan that is in deferment. These types of loans accrue interest throughout the student’s education career, however, no payments are due until after the student graduates or withdraws from schooling. 
A subsidized student loan is typically reserved for students who demonstrate a financial need on an ongoing basis, particularly throughout their university education. The most common form of subsidized student loans are Perkins and Stafford Loans. 
Am I Eligible for a Federal Subsidized Loan?
To be ruled eligible for a Federal Subsidized loan you must satisfy the eligibility requirements for financial aid as described by federal law. Moreover, you must demonstrate a real financial need for the borrowing. Financial need is demonstrated when your expected family contribution, plus the amount of the loan and any other financial aid received, is less than your cost of attendance or tuition. 
If you are ruled eligible for a Federal Direct Subsidized loan, you must understand the limits attached:
• For a 1st year student, earning fewer than 30 credits, you are not permitted to borrow more than $3,500 per year. 
• For a 2nd year student, earning 30 credits or more, you are not permitted to borrow more than $4,500 per year
• The undergraduate aggregate maximum amount borrowed is capped at $23,000
If you are ruled ineligible to borrow the full amount you request or you need additional funding, you may request some or the full balance as an unsubsidized loan. 
You may not borrow in excess of the cost of attendance minus the family contribution and any additional funding you receive. Before you process your request for a loan, your school’s financial aid office will calculate the amount of funding you are eligible for. 
If you are enrolled for less than a full academic year, the amount of the loan you are eligible for may be less than the limits listed above. Moreover, the government may place a limit on how frequently you request or receive the maximum amounts. 
Is there any Fees Associated with a Subsidized Student Loan?
Although the government will promise to satisfy the interest payments, you are obliged to fulfill an origination fee of 3% and a default fee of 1%. These fees are deducted in proportion to your loan amount after each disbursement. The proceeds from this fee will be provided to the Federal Government to partially offset the administrative costs of processing a standardized loan. 
When am I Required to Pay Back my Subsidized Loan?
All recipients of a standardized loan are given a six month grace period after they graduate, drop below half-time or leave school before they are required to begin repaying their loan. During a grace period, students will not have to make payments on the principal and are not charged interest. Students are permitted to prepay any portion of the loan at any time without accruing a penalty. 
All accounts are actively managed by the United States Department of Education’s Direct Loan Servicing Center. If you have a problem with your account do not hesitate to contact their offices at 1-800-848-0979. 

Savings

Savings

When you are trying to save money there are a number of options that you will have in attempting to build your wealth for future investing.   Saving money may seem like an easy task but it requires, budgeting, discipline and the elimination of unnecessary expenses that eat away from your savings.  There are many options when saving money.  This includes CDs, bonds, savings accounts, college savings accounts and many others.
Savings Accounts
The simplest way to save money,  if you don’t have one already, is to open a savings account. A savings account in a banking institution is a stable way to save your money. The upside to a savings account is that the funds are easily accessible by going to your banking institution and making a withdrawal. The downsides are that you can easily access your savings account and make withdrawals. When you are in need of money it is easy to fore go your savings plan for immediate gratification. Another downside is that savings accounts usually have very low interest rates, usually around 2%. Considering the rate of inflation a savings account will not help you gain savings and should only be used for short term saving while you look for, and save, for more lucrative saving opportunities.  The low interest rates associated with basic savings accounts is partially due to the ability of the savings account holder to withdraw the funds at any time.  In this way, they are different from Certificates of Deposit.
Certificates of Deposit
A certificate of deposit is a better way of accumulating savings than a traditional savings account.  A certificate of deposit acts much like a savings account but with one important difference; the certificate of deposit is a savings investment in which the depositor agrees to keep the money in the account for an extended period of time.  
Certificates of Deposit are can be purchased in different incremental periods.  Usually the time that you must invest your money in are allocated in 3 months, 6 months, 1 year up to 5 years.  The amount of interest that you will receive from your savings in a certificate of deposit will depend  on a number of factors.  The greater the principal invested the greater the interest rate you will receive.  In addition, the longer the term, or the smaller the banking institution the higher the interest rate you will receive.  
Savings Bonds
Savings bonds are yet another way for you to save money.  Savings bonds are a most stable form of bond.  You can get savings bonds through private institutions or through the United States government.   A United States Savings Bond is almost guaranteed and they come in many different forms. The two most prevalent are the EE savings bond and the I savings bond.
The EE savings bond is characterized by a stable, long term investment. WIth EE savings bond the federal government will require a long term investment of 20 years in order for the bond to reach its maturity level. There are two types of EE savings bonds: paper EE savings bonds and electronic EE savings bonds. The most important distinction between the two is their return on investment. With a paper EE savings bond the investor will get a yield on return of the value he invested upon the maturity of the bond. This means that if you invested $5,000 then in 20 years you will receive a payment of $5,000 plus the interest accumulated over that period of time. In contrast, an electronic EE savings bond will require you to pay half of the value of the savings bond and upon its maturity you will receive the face value; essentially allowing you to double your investment. You are not required to keep your investment for the 20 year period in either form of EE savings bonds but their is a penalty for early withdrawal. The disadvantages to EE savings bonds are the long maturity length, and the fact that an individual is allowed a maximum of $25,000 of investment per year. EE savings bonds are exempt from state and local taxes but they will be used to calculate federal tax income. In addition, EE savings bonds do not adjust for inflation.
The other type of United States Savings Bond that is very prevalent is the I bond. An I bond is a U.S. savings bond where the yield on maturity is calculated as the fixed rate of return plus inflation. The I bond is periodically adjusted to factor in for inflation and the yield at the end of the maturity will be in a way that you will not lose money based on the inflation rate. One of the disadvantages of an I bond is that it is considered a zero coupon bond. The interest that accumulates over the lifetime of the bond is automatically re-invested into the I bond.
U.S. savings bonds should be used for long term savings and once you purchase a bond it should be forgotten. When looking at the maturity date of bonds you should look at when you may need the money back and how much money you have invested. If the purpose of the savings bond is to accumulate savings for retirement or long into the future then you may want a 20 year bond. If you are looking to save for vacations, future home purchase or a future long term investment like real estate, then a shorter term bond may be more beneficial.
Corporate savings bonds act in the same way as United States Savings bonds but they do not guarantee the same type of guarantee as a U.S. savings bond.  Corporate savings bonds are issued by corporations and other business entities when they need to gain capital for their business operations.  Just as in U.S. Savings bonds, a corporate savings bond will consist of coupons that will be given to the creditor of the bond.  Every 6 months the creditor will receive a coupon that consists of the amount of money that is owed to the creditor plus the amount of interest that was agreed to when the bond was issued.  The interest rates associated with corporate bonds will often be higher than U.S. savings bonds and the riskier the venture the more interest that the issuer will be required to offer in order to get investments.  
401k
The most promising way to build savings  is to invest in your companies 401k. A 401k is a savings plan that you set up with your employer to save for retirement. The retirement savings account has two obvious benefits. The first benefit is that you will be able to save your money in a savings plan through a consistent allocation from your paycheck into your 401k. In this way you don’t even know how much your saving. The amount will be automatically taken from your paycheck and, in addition, your employer will contribute an equal amount to your 401k. So if you contribute $100 a month you will actually be putting $200 a month into your 401k. Another advantage is the time value of money. Your investment in a 401k savings account will allow you to avoid current taxes and put your money to work for you instead of being lost to the government. On the same note, by investing in your 401k you may actually be lowering your tax liability. If you are in the 28% tax bracket and you decide to invest $1000 that $1000 a month will not be included in your taxable income and you may move down to the 20% tax bracket.
529 College Savings Plan
A 529 College Savings Plan is a savings plan that allows parents to save for their children’s college tuition.  529 College Savings Plans and other Qualified Tuition Investment plans are tax deductible and will not be used in compiling the parents gross income for tax purposes. 
There are two types of 529 College Savings Plans: prepaid and savings. Prepaid 529 College Savings Plans allow parents to purchase tuition credits at present day rates. This essentially means that a parent who will have a child in college in 20 years may place money in a Prepaid 529 College Savings Plan, at the current rate of tuition, to be used 20 years from that date, even if tuition is higher in the future. For example, if the current per credit tuition is $2,000 and the parent purchases 5 credits through the Prepaid 529 College Savings Plan then it will guarantee those 5 credits even if the per credit tuition rate is $4,000 by the time the child goes to college.
The other type of 529 College Savings Plan is different in that the growth of the Savings 529 College Savings Plan is based on market performance of the investment form, which is usually in the form of mutual funds. In this way you may benefit greatly over a Preferred 529 College Savings Plan in that the market could outperform the rate of tuition increase. However, in the alternative, the Savings 529 College Savings Plan may have stagnant, or negative growth, over time that would not equal or exceed the Prepaid 529 College Savings Plan.
A 529 College Savings Plan may be used for tuition, books, fees, equipment and supplies for any accredited college or university, public or private, in the United States as well as vocational schools and some universities from outside the United States. 529 College Savings Plans may also be used for room and board. 
One of the savings  advantages of a 529 College Savings Plan is that it affords tax exemption from state taxes. This means that all the money that is contributed into the 529 College Savings Plan will be treated as if the money was never considered part of your income. For example, if your income for the year is $100,000 and you contribute $10,000 to your 529 College Savings Plan in that year then, for tax purposes, you will be treated as if your income for the year was $90,000.   529 College Savings Plans are not irrevocable and the person who invests in the money may withdraw at any time but will incur penalties for early withdrawal. Even though it is perfectly legal to do this the parent will be required to pay income tax on the benefit incurred as well as a 10% early withdrawal penalty.
The exception to the early withdrawal penalties are: the designated beneficiary dies; the designated beneficiary becomes disabled; or the designated beneficiary receives a scholarship, veterans assistance, or employer provided education assistance. If one of these things occurs then the penalties will not apply. Even if none of these exceptions apply no penalty will be incurred by the 529 College Savings Plan holder if, for some reason, the entire allotment of savings is not used on the named beneficiary and the amount remaining is rolled over to another beneficiary. If the leftover amount of the 529 College Savings Plan is rolled over to another qualified recipient within 60 days then the there will be no penalty associated with early withdrawal.
Staying Focused
An important aspect in building your savings is to maintain discipline and set a goal for yourself. Money is just a figure and doesn’t really correlate with incentive to save. For this reason you should set a reward for yourself. For example, if you are able to save $10,000 by the end of the year you should reward yourself with a $2,500 vacation. You should set this goal at the beginning of your savings plan and, unlike having your goal just to save money, it will inspire you and give you motivation. It is also better in that you will see a light at the end of the tunnel instead of a constant, repetitiveness. Your savings goals should be realistic. Do not expect that you will be able to save $10,000 if in order to do that you will have to eliminate all pleasures from your life, live off of bologna sandwiches, and use one ply toilet paper. Live within your means but allow for some leeway so that saving is not a chore. The best way to destroy your savings plan is to set your goals too high and lose interest at the first sign of adversity.
You must stay focused on the future. You will not realize gains from savings immediately and you may not even have any real gain after a year or two but it will happen if you budget accordingly.

Online Forex Trading

Online Forex Trading

What is online Forex trading?
One of the appeals of Forex trading is that it can be done online, sometimes with the assistance of programs that track and make automatic transactions, based on use preferences and defined programming.  The use of the internet is an invaluable tool for potential Forex traders as this lowers the bar to entry and presents those that engage in online Forex trading with the latest, up-to-date information and analysis on currency trends.
How do I engage in online Forex trading?
You must be able to read Forex quotes.  These are in pairs as with every online Forex trading transaction, you are simultaneously buying and selling two currencies.  For instance, the US/Euro Forex quote may read like this:
EUR/USD = .7504
The first currency (EUR) represents the base currency that the quote is based on and the second represents the quote currency (USD).  With this, you can determine that approximately .75 US cents can buy 1 Euro.  
With this in mind, you will buy any number of Euros and wait for the exchange rate to increase.  At that point, you will sell your Euros for USD, thus making a profit through online Forex trading.  Under the higher exchange rate, it will take more US dollars to buy Euros and that difference represents your profit, as the demand for Euros is higher now when you have sold it.

Currency Trading

Currency Trading

What is currency trading?
Although the only time some individual will buy a foreign currency is when travelling abroad, some investors will engage in currency trading.  Currency trading on the Foreign Exchange Market is a risky investment as although the assets are liquid, the rates can be somewhat unstable and subject to market forces that are difficult to understand.  Currency trading determines the exchange rate for non-pegged currencies around the world and reflects the supply of the currency against the present demand for that currency.  “Safe haven” currencies generally perform better in currency trading during times of hardship, generally as Forex investors will feel that the safe haven currency will rise or at least not fluctuate significantly.  Non-safe haven currencies, generally from developing countries, will diminish in economic hardship as currency trading tends to avoid speculation during these periods.
Currency trading is usually subject to conventional wisdom as well as studies in the patterns of how currencies perform in relation to the economic and political outlook of the country.  As such, central banks may influence currency trading by cutting or raising interest rates to either slow or expedite the flow of currency.  Long term trends also affect currency trading, including trade deficits and gross domestic product growth.  
Some Forex programs exist to help investors with currency trading.  These automatic Forex programs will use programed and user-defined thresholds to determine the profit-loss risk of investments and buy or sell assets accordingly.  The best of these currency trading programs will be updated with news on financial outlooks and trends so as to make the best transactions for the individual Forex investor.

New “Apps” Make Personal Finance a Breeze

New “Apps” Make Personal Finance a Breeze

As many people have struggled to get their personal finance in order, especially as they seek the newest and expensive ‘must haves’, these same expensive pieces of technology now offer help in getting their user’s books in order.  
Now, Ipad, smart phone, and tablet users have a host of news applications that can help them do everything from manage their weekly grocery list to trading stocks with the push of a button.  These new forms of technology provide an engaging visual representation of the users finances, including charts, graphs, and alerts concerning their budget.  
Such technology comes at a time when it is easier than ever for consumers to make purchases, using online stores and auction sites.  Banking in general continues to move to the digital world, where transactions, deposits, withdrawals, and countless other economic activity takes place without any physical money exchanging hands.  

Emerging Market Investors Face Losses Among Worldwide Fears

Emerging Market Investors Face Losses Among Worldwide Fears

The emerging markets of the BRIC nations lead many to favor investing in their economies, as it was believed Brazil, Russia, India, and China were ready to join the major economies of the world.  While such held true, recent turmoil in the world markets has rocked the financial security of such investments.  
This year has been especially hard on foreign finance as market fears have moved money into United State markets.  However, the decline has not been due to lagging economies of the BRIC nations, but rather fears over European debt problems and a sluggish American economy.  
The United State’s economy, despite problems in recent years, has still been the engine driving these markets.  Imports from BRIC nations have helped bring them into their economic viability while lowered demand has hurt.  Should an economic recovery in the United States and Europe become sustained, it is expected that the emerging markets will be the greatest gainers as their finance opportunities expand.  

European Finance Leaders Meet to Avoid Euro Zone Debt Crisis

European Finance Leaders Meet to Avoid Euro Zone Debt Crisis

In an emergency meeting to decide how to deal with an impending Greek default, Euro Zone leaders are meeting in Brussels to discuss the possibility of a bailout to keep the Euro afloat and the European Union intact.  
The Greek problem has recently been exacerbated by referendums and protests indicating Greek citizens are no longer willing to cut their benefits, wages, or sale of assets.  Euro Zone members, especially the economically stronger nations of Germany and France, have pushed for further cuts in Greece in order to avoid default.   
Equally troubling are new reports that Italy is facing similar default issues, as political turmoil has created tension in Italy and uncertainty abounds.  Many in finance believe Italy is just as weak as Greece and may further pull down the value of the Euro while striking fear into international markets.  

401k Hardship Withdrawal

401k Hardship Withdrawal

What is a 401(K) Hardship Withdrawal?


A 401(K) hardship withdrawal is a form of loan permitted by the Internal Revenue Service, which enables a contributor to withdraw funds from their retirement plan to satisfy an immediate financial need. The Internal Revenue Service will permit a 401(K) hardship withdrawal if the following criteria are met:
• The 401(k) hardship withdrawal is needed to fulfill an immediate and important financial need
• The 401(k) hardship withdrawal is necessary to satisfy the particular need
• The contributor has no other means to fulfill the need—the individual cannot utilize any other source of funds 
• The 401(k) hardship withdrawal should not exceed the total amount needed by the individual
• The individual cannot contribute to their 401k plan for up to 6 months after the withdrawal date
• The individual must have first received all non-taxable distributions or loans available under their 401k plan
A 401(k) hardship withdrawal is typically permitted by larger companies; however, due to the high costs associated with administration, the maneuver may not be readily available with smaller companies. 
 
Acceptable Reasons for a Hardship Withdrawal:
The following reasons are typically deemed acceptable by the Internal Revenue Service to engage in a 401(K) hardship withdrawal:
• Repairs of the contributor’s primary residence
• Funeral expenses
• Payments associated with home foreclosures
• Payments required to prevent the contributor from being forced out of their residence
• Payments needed for college tuition and other educational costs such as transportation, food, room & board etc.
 
• Purchase of a principal residence 
• Unexpected medical expenses 
All 401K hardship withdrawals are subject to 10% early withdrawal fees. Moreover, the funds secured from a 401k hardship withdrawal are also subject to income taxation. For instance, if an employee withdraws $10,000 as a hardship withdrawal, the individual will owe $1,000 in fees and will be taxed on the remaining $9,000. That being said, the following 401(K) hardship withdrawals will not be subject to the 10% penalty:
• The individual stops working, quits, retires or gets laid off at or after the age of 55
• The individual sustains unexpected medical debts that exceed 7.5% of their Adjusted Gross Income
• A court orders the individual to give funds to a divorced spouse or dependent 
• The individual sustains a permanent disability
• The individual stops working and begins taking regular payments based on a fixed schedule that will provide equal payments for the rest of their expected life; this provision must last 5 years or until the individual turns 59.5 years of age.
Frequently Asked Questions Pertaining to 401(k) Hardship Withdrawals:
How Does the IRS Define a “Hardship” for a 401(k) Plan?
For a distribution from a 401(k) to be permitted on account of hardship, it must be used to satisfy an immediate and heavy financial reason. Moreover, the amount must be necessary to satisfy the particular financial need. The need of the employee will also include the need of the employee’s dependent or spouse. Whether the need is heavy and immediate will depend on the facts and circumstances; the above listed reasons are deemed acceptable by the Internal Revenue Service.
What is the Maximum Amount of Contributions that can be distributed as a Hardship?
The amount of contributions available for a 401(K) hardship cannot be more than the amount of the individual’s total elective contributions (Roth contributions are also included) as of the date of distribution reduced by the amount of previous distributions. 
Is a Hardship Distribution Allowed from an IRA?
There is typically no limit on when an IRA holder may take a distribution from his or her IRA, however, the individual may be subject to unfavorable tax consequences. 
Certain distributions from an IRA account that are used for expenses similar to those that may be deemed eligible for hardship distributions from a retirement plan will be ruled exempt from the additional taxation on early distributions. 
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