For most people, though, better sources exist. That's why hardship withdrawals come with such severe limitations. You may already have a better way to meet emergencies - even the ones allowed for hardship withdrawals. The best way of course, is to plan ahead when you aren't facing an emergency. What it costs you to withdraw A hardship withdrawal will cost you a bundle in taxes now and in future wealth.
Taxes eat a big chunk of a withdrawal.
Next, the IRS will add the total withdrawal to your annual income. Plus, withdrawing money robs you later on in retirement when you're even more vulnerable to unexpected cash outlays. Simply put, you'll likely end up with a smaller nest egg. You may have a leaner retirement or have to retire later than you planned. The table below shows a typical scenario.