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Chapter 18. Cashing In or Out of Your 40... > The Ten Percent Penalty - Pg. 178

Cashing In or Out of Your 401(k) 1. 2. 178 The distribution must not exceed the amount needed by the employee. (Translation: You can't take more than you need.) The employee must have obtained all distributions or nontaxable loans available under all plans of the employer. (Translation: You have to use the dollars you may have put in your account after taxes, and you have to borrow all you can from your account.) Warning! If you're married, your spouse may have to sign off (provide written consent)on a hardship withdrawal from your 401(k). Again, this depends upon the plan's rules. Check it out before you start the process and be sure your spouse thinks the withdrawal is a good idea and is willing to sign off on it. This also applies to getting a loan in Chapter 17. 3. 4. The employee's maximum elective contribution in the next taxable year must be reduced by the amount of the elective contribution of the year of the hardship withdrawal. (Translation: You may be very limited in what you can contribute the following year.) The employee must be prohibited from making elective contributions to the plan for 12 months after the withdrawal. (Translation: You can't contribute to your plan for a year--sort of like being suspended from school.) Note: The "suspension" period is reduced from 12 months to