Last resort: Raid 401(k) to beat foreclosure

Option No. 2 -- Withdrawal

IRS guidelines allow hardship distributions only for "immediate and heavy financial needs," including medical and funeral expenses, college tuition costs, and to stop an eviction or foreclosure.

Each plan has its own rules governing how much of your account balance you can withdraw, and what you need to do to qualify.

In some cases, you may actually have to have a foreclosure notice in hand -- not just be behind on your mortgage payments or facing a resetting interest rate -- to qualify, says Rick Meigs, president of 401khelpcenter.com.

Other employers aren't that strict. Only a visit to your company's human resources department can clear up any gray areas.

If you do manage to qualify for a hardship distribution, you'll have to pay income tax on any money you withdraw. And if you are younger than 59½, you'll pay a 10 percent penalty for early withdrawal. You'll also be barred from making any contributions to your 401(k) plan for six months.

For example, if you're younger than 59½, take a hardship distribution of $10,000 and are in the 25 percent tax bracket, you immediately lose 35 percent of that money -- 25 percent tax plus 10 percent penalty -- or $3,500. The higher your tax bracket, the bigger the bite.

If you take money out of your IRA, the same penalties apply.

A loan is a much better deal, and won't have as much impact on the amount of money you'll have available when it's time to retire, Meigs says. "The money is at least earning some sort of market interest rate and will eventually be returned to the account."

That's why some plans will only approve a hardship withdrawal after you have exhausted all of your 401(k) loan options.

With hardship distributions, you're simply taking the money out with no concrete plans to return it. "That obviously can have a tremendous effect on the assets you'll have available in retirement," he says.

To tap or not to tap?

It depends. Using retirement money to keep up with the mortgage can be a good move for some people, but could dig others into an even deeper hole.

A loan or hardship distribution, "can be a good idea if it'll get you to a place where you can refinance, or if you're using it to buy time to get to a sustainable financial situation," Utkus says.

But if your house is simply unaffordable -- even if you refinance -- "it's better to recognize that fact early on, rather than sink the pension pot into the house," says Anthony Webb, a research economist with the Center for Retirement Research at Boston College.

"If the house is eventually repossessed, you'll lose all of your retirement savings, too."