If you have money invested in an IRA, a 401k or defined contribution retirement plan, you may be able to borrow or cash in your plan to help cover your medical expenses. You may be able to access this money fairly quickly. As mentioned earlier, you should consider the implications very carefully, preferably in consultation with a financial advisor. There may be taxes and penalties involved if you access money from your retirement plan. Some employers allow employees to borrow from their retirement fund. Generally you may borrow up to 50 percent of the vested balance of your account up to $50,000. The interest rate on the loan is usually reasonable, and if you pay the loan back on time (usually within 5 years), there is no penalty for the withdrawal. However, if you don’t pay the loan back, it’s considered an early withdrawal, and you will have to pay the penalty.
If you need more than 50% of your vested balance, your options are more costly. Having unreimbursed medical bills for yourself or your spouse does qualify as a reason for a “hardship” withdrawal. However, this does not excuse you from paying both regular income tax and the 10% early withdrawal penalty on the funds.
Again, when coping with substantial medical debt, it is best to contact a financial advisor for help. There are long-term and short-term consequences of loans and liquidation that are crucial to consider. The website www.survivorshipatoz.org
is an excellent source of information.