How to Access 403(b) Funds Without Costly Mistakes
A 403(b) retirement account offers several ways to access funds, but strict rules apply. Withdrawals can be taxed differently depending on the type of account, while loans provide temporary access under certain conditions. Understanding the requirements helps avoid penalties and maximizes flexibility.
Accessing money from a 403(b) account follows specific criteria. You can withdraw without penalty if you reach age 59½, leave your job, become disabled, face financial hardship, or pass away. Early withdrawals before this age may incur a 10% penalty on top of income taxes, unless exceptions like the rule of 55 or rule 72(t) apply.
Withdrawals from a standard 403(b) are taxed as regular income, while Roth 403(b) withdrawals remain tax-free. Required minimum distributions (RMDs) start at age 73, with a 25% tax penalty for missing them. You are not forced to take money out just because you meet withdrawal conditions. Loans from a 403(b) allow temporary access for large purchases, with repayment due within five years. Providers like Fidelity (plan code 50548) and TIAA (access code 100941) often manage these loans. However, leaving the plan before repaying triggers taxes and penalties on the remaining balance. Rolling over a 403(b) into another retirement account can offer better terms and lower costs. This option provides more flexibility while keeping funds invested for the future.
A 403(b) account provides multiple ways to access funds, but each method has its own rules and consequences. Loans, withdrawals, and rollovers must be handled carefully to avoid unnecessary taxes or penalties. Understanding these details ensures better financial planning for retirement.
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