The government is making it easier for investors facing an economic hardship to take money from their 401(k)s. But financial experts urge savers to be cautious before doing so.Hardship withdrawals are allowed only if your plan sponsor permits them and you have an “immediate and heavy” financial need that you have no other means to cover, including medical expenses, funeral costs and to prevent an eviction, according to the IRS.You pay income taxes on the distribution, as well as a 10% early withdrawal penalty if you are younger than 59½. Unlike a 401(k) loan, you are not required to pay the money back. Around 80% of 401(k) plan sponsors allow hardship distributions and just 2.3% of participants take them, reports Investment News.Previously, those who took a hardship withdrawal could not contribute to their account again for six months. Under the new rules, which take effect in January, they will be allowed to begin contributing again immediately. Additionally, plan sponsors will no longer need to require participants to take a loan before they can take a hardship withdrawal.Employees will also be able to borrow their employer’s contributions to their account and investment earnings. Previously, they could only take out their own contributions.Here’s a list of the topics that qualify for the distribution, per the IRS:Medical expenses for the worker, their spouse or children.Purchase of a primary residence.Certain college expenses for a worker, their spouse or children.Payments to prevent eviction.Funeral expenses.Certain expenses to repair damage to a principal residence.Here’s why you should still be wary of making a hardship distribution.’Tread carefully’While this could be viewed as a way to give workers more options, they need to “tread carefully,” Patrick Whalen, a Los Angeles-based certified financial planner, tells CNBC Make It.”The new hardship withdrawal rules are a continuation of an existing trend of forcing individuals to be responsible for making the right retirement decisions,” says Whalen. “My advice is to avoid taking a hardship withdrawal unless you have exhausted all other options.”He says, for example, that continuing to rent is “almost always” a better option than making a hardship distribution to buy a house. And “having a funeral at home is better than endangering the financial health of the living.” If there is any other way to make your financial situation work besides dipping into your 401(k), you should opt to do that.At the extreme end of things, because 401(k) balances are protected in personal bankruptcies, Whalen says it’s ideal to leave your retirement savings alone rather than use them to pay off debt. The taxes and penalties on withdrawals alone should dissuade you, “especially if the hardship withdrawal is only a temporary patch on a larger problem,” he says.On top of the taxes and early withdrawal penalty, taking money out of your 401(k) that you aren’t replacing also means losing out on all of its potential growth in the market. If you take out $10,000 from your account, you’re not just losing 10 grand in retirement savings, you’re losing the compounding returns as well. Unless your situation is dire, taking money from your retirement savings will only make things harder for you later on.As a last resort, consider a 401(k) loan. You are required to pay the money back within five years plus interest, but if you have a pressing need, it’s a better option than a hardship distribution. You’ll miss out on any growth your funds would have accrued while you’re “borrowing” them, but at least the money will eventually make its way back into your account, and you won’t pay taxes on it if it does.Don’t miss: Index funds are more popular than ever—here’s why they’re a smart investmentLike this story? Like CNBC Make It on Facebook!