Eviction notice on my door. 401(k) hardship withdrawal or a loan?

The question

An illustrative letter.

The answer

My dear, an eviction notice taped to your own door is one of the loneliest sights there is. I am glad you are asking questions before signing anything at HR, because the order in which you do things here matters as much as the choice itself. Let us start with the door, then turn to the 401(k).

Does an eviction notice mean I have to leave right away?

No. In Louisiana, a landlord who wants a tenant out must first deliver a written notice to vacate, which gives at least five days, unless the lease waived it. If you are still there after that, the landlord has to file in court, and a judge decides at a hearing. Only after a judgment for the landlord, and 24 hours more, can a court officer be sent to remove you. The process moves quickly, so do not wait. But you have time to act, and if you receive court papers, go to the hearing. It is your chance to be heard.

What should I try before touching my retirement?

• Your landlord. Many landlords would rather be paid than go to court, which costs them time and fees. Offer something specific, such as part now and the rest over your next two or three paydays, and get any agreement in writing.
• Emergency rental help. Dial 211. It connects you with rental assistance programs, local charities and churches that help with back rent.
• Legal help. Legal aid organizations often represent tenants facing eviction at no cost, and they know the local courts.

Each of these costs your future self nothing. That is why they come first.

How does a hardship withdrawal work?

Your plan may let you take money out to prevent eviction from your home. The IRS lists it as one of the reasons that automatically qualifies. But the money comes at a steep price. It counts as income, so you pay income tax on it. Because you are under 59 and a half, you will usually owe an extra 10 percent tax as well. And a hardship withdrawal can never be paid back into the plan.

Here is how that adds up. If your federal tax bracket is 12 percent, the penalty and the federal tax together take about 22 cents of every dollar, before Louisiana's state tax. To end up with $1,800 in hand, you might need to withdraw $2,300 or more. And that money would otherwise have stayed invested for twenty more years.

You would not be alone in taking one. In 2025, a record 6 percent of the savers in one of the largest retirement plan providers' accounts took a hardship withdrawal. But common is not the same as cheap.

How does a 401(k) loan work?

With a loan, you borrow from your own account and pay yourself back, with interest, usually through deductions from your paycheck. Federal rules let you borrow up to half your vested balance, to a maximum of $50,000, and repay over as long as five years. There is no tax and no penalty as long as you keep up the payments.

The risk is your job. If you leave or lose it, many plans ask for the balance to be repaid quickly. Whatever you cannot repay is treated as a withdrawal, taxed and usually penalized, unless you put that amount into an IRA by your tax filing deadline for that year, extensions included. A loan also lowers your take-home pay while you repay it, so choose a deduction that will not leave you short on next month's rent.

Is there a smaller option in my plan?

Ask HR whether your plan offers an emergency personal expense distribution. Since 2024, plans may allow one withdrawal a year of up to $1,000 for an unforeseeable emergency, without the 10 percent penalty, and you may repay it within three years. You still owe income tax on it, but for part of your shortfall it is gentler than a full hardship withdrawal.

So which one costs me less?

For most people in your position, the loan, provided your job feels steady, because the money returns to your account and you avoid the tax and penalty. The withdrawal is the last resort, for when no loan is possible. Ask HR how long each takes to arrive, too, because a landlord who has agreed to wait two weeks will not wait six.

How do I keep this from happening again?

Once the rent is caught up, start a small cushion, even $20 a paycheck, in a savings account you do not touch for everyday spending. A few hundred dollars set aside is often the difference between a late fee and a notice on the door. Our Budget Planner can help you find that $20, and the guide Why Savings Matter explains how a cushion grows.

You have worked hard to save for your later years, my dear, and that money is your future self's rent. Make the call to your landlord before you sign anything at HR. Protect your retirement if you can, and borrow from it gently, only if you must.

One thing to do this week

Call your landlord with a specific repayment offer, dial 211 about rental help, and ask HR how long a 401(k) loan takes to arrive.