How to Request a Hardship Withdrawal from Your Principal Financial 401(k)

A Principal Financial 401(k) hardship withdrawal lets you pull money from your retirement account before age 59½ to cover a serious financial need, and you request it through the account management section at principal.com. Expect to owe ordinary income tax plus a 10 percent early-withdrawal penalty on the amount you take.¹ Once your employer or plan administrator approves the request, funds can reach your bank within a few business days. The money is gone for good: you cannot repay it or roll it over later.

Do You Qualify

Principal-administered plans generally use the IRS safe harbor list of seven situations that automatically count as an immediate and heavy financial need:

Unreimbursed medical expenses for you, your spouse, your dependents, or a primary plan beneficiary.
Costs directly tied to buying your primary residence. Mortgage payments on a home you already own do not count.
Tuition, related fees, and room and board for the next twelve months of post-secondary education for you, your spouse, a child, a dependent, or a plan beneficiary.
Payments needed to prevent eviction from or foreclosure on your primary residence.
Funeral or burial expenses for a parent, spouse, child, dependent, or plan beneficiary.
Repair of casualty damage to your primary residence from events like fires, storms, or floods.
Expenses and lost income from a FEMA-declared disaster, if your home or workplace was in an area designated for individual assistance.

Your employer’s plan can recognize additional hardship reasons but is not required to. If your situation doesn’t fit neatly into one of these categories, check your Summary Plan Description before you start a request.

How Much You Can Take Out

The maximum is the amount you actually need, plus enough to cover the federal and state income tax and the 10 percent penalty on the distribution itself.² If you need $10,000 to pay a medical bill and estimate $3,000 in taxes and penalties, you can request $13,000. That gross-up is a legitimate part of the withdrawal.

Not every dollar in your 401(k) is available. Hardship money generally comes from your elective deferrals, employer matching contributions, and employer nonelective (profit-sharing) contributions. Earnings that have built up on your elective deferrals are off-limits.³ Any amount you request beyond the documented need will be denied.

How To Submit the Request Through Principal

Log in at principal.com and open the account management section. Choose the hardship distribution option, select the safe harbor category that fits your situation, and enter the amount, including any gross-up for taxes. Have your bank routing and account numbers ready if you want direct deposit.

The form will ask for your Social Security number and current contact information to verify identity. In the tax withholding section, federal withholding defaults to 10 percent for distributions that are not eligible rollovers, and you can elect a higher rate. State withholding rules vary by state.

If your plan requires supporting documents, upload scans or PDFs directly through the portal. Some employers route hardship requests through a third-party administrator or require paper copies mailed or faxed to a separate office, so confirm the process with your plan sponsor if the online option isn’t there.⁴ For help, Principal’s retirement line is 877-475-3436, Monday through Friday, 7 a.m. to 7 p.m. CT.

What Documentation You’ll Need

Since January 1, 2023, the SECURE 2.0 Act has allowed plan sponsors to let participants self-certify a hardship instead of submitting proof.³ Under self-certification you sign a written statement confirming three things: the withdrawal is for one of the safe harbor reasons, the amount does not exceed your actual need, and you don’t have other resources available to cover the expense. The administrator can rely on that statement unless they have actual knowledge that it is wrong.²

Whether your specific Principal plan has adopted self-certification depends on your employer. If it hasn’t, gather documents that match your category before you start:

Medical: itemized bills or insurance Explanation of Benefits statements showing the unpaid balance.
Home purchase: a signed purchase and sale agreement or closing disclosure showing the cash needed at settlement.
Eviction or foreclosure: a formal notice from the landlord or mortgage servicer with a deadline.
Tuition: an invoice or statement of account from the school.
Funeral: a signed contract from the funeral home or itemized burial invoices.
Home repair or disaster losses: repair estimates, contractor invoices, or FEMA correspondence identifying the declared disaster area.

Even under self-certification, keep the records. If the IRS audits your return, you’ll need to prove the withdrawal met the safe harbor requirements yourself.

Two older restrictions no longer apply. Plans cannot require you to suspend contributions for six months after a hardship, and the safe harbor rule that forced you to take all available plan loans first has been eliminated.² A plan may still include a loan-first condition as its own rule, so check your Summary Plan Description.

When the Money Arrives

After submission, your employer or third-party administrator reviews the request. Standard processing takes up to seven business days, and missing documentation or complex situations push that longer.⁴ Delivery timing depends on how you asked to be paid:

Direct deposit posts to your bank on the second business day after processing is complete.
A paper check prints on the second business day after processing, plus mail time.
A wire transfer reaches your bank on the first business day after processing.

You can track the request through Principal’s online portal. Responding quickly to any request for additional documents prevents further delay.

What It Costs You

A hardship withdrawal is taxable income in the year you receive it, and if you’re under 59½ you also owe a 10 percent additional tax.⁵ Someone in the 22 percent federal bracket loses roughly 32 percent of the withdrawal to federal taxes alone, before any state tax.

Principal withholds 10 percent for federal income tax unless you elect a higher rate. If your actual liability exceeds what was withheld, you’ll owe the difference at filing. This is where people get burned: they take $15,000, see $1,500 withheld, spend the rest, and then face another $3,000 bill at tax time. In January you’ll receive a Form 1099-R from Principal reporting the distribution. The 10 percent penalty is added to your tax bill unless you qualify for a narrow exception such as a qualifying disability or medical expenses exceeding 7.5 percent of your adjusted gross income.⁵

The distribution is permanent. Unlike a plan loan, you cannot pay it back into the 401(k) or roll it into an IRA or another employer’s plan.³ Whatever you take, plus the growth it would have earned, is gone. For a 35-year-old withdrawing $20,000, the lost future growth at a 7 percent average annual return would run roughly $150,000 by age 65. You can keep contributing to the plan right away, and if your employer matches, keep contributing at least enough to capture the full match so you aren’t compounding the loss.

Check These Alternatives First

Under the SECURE 2.0 Act, your plan may offer an emergency personal expense distribution of up to $1,000 per year for unforeseeable personal or family emergencies, without the 10 percent early-withdrawal penalty. You self-certify eligibility and can repay the amount within three years. If you repay in full you can take another one before the three years are up; otherwise you wait, or make contributions at least equal to the previous withdrawal before taking a second.³

A 401(k) loan is another option if your plan allows it. Loans do not trigger income tax or the penalty as long as you repay on schedule, and the interest goes back into your own account. The catch is that if you leave the job before the loan is repaid, the outstanding balance can be treated as a distribution. For small needs, the emergency distribution is often the simplest path. For larger amounts where a loan isn’t available or practical, a hardship withdrawal may be the only route left. Go in with a clear picture of the tax cost and the permanent reduction to your retirement balance before you file the request.

1
Internal Revenue Service. Hardships, Early Withdrawals and Loans
2
Federal Register. Hardship Distributions of Elective Contributions, Qualified Matching Contributions, Qualified Nonelective Contributions
3
Internal Revenue Service. Retirement Topics – Hardship Distributions
4
Principal Financial Group. Principal Financial Hardship Withdrawal
5
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions