Pre-tax contributions to your workplace savings plan refer to dollars that are deducted from your pay before federal income taxes are deducted. This means that your taxable income for the year can be lower. Because of these tax advantages, the IRS puts many restrictions on withdrawing this money before you reach retirement age. After-tax contributions are those you make from your net pay, which is your income after taxes. However, depending on your adjusted gross income, those contributions may or may not be fully deductible.
Many plans allow for financial hardship distributions.
Check with your employer for applicability. The circumstances below are common cases in which hardship withdrawals are allowed, although your plan may allow for different reasons. You should retain any documentation that proves the money was needed for hardship circumstances. Please consult your tax advisor regarding your own personal tax situation. For more information please e-mail us.