In most cases, at age 59˝ you can withdraw your money from
a 403(b) plan without penalty. However, any distribution would still be subject
to applicable federal, state, and local income taxes.
Distributions may be made prior to age 59˝ only under the following circumstances:
- Separation from Service with the Sponsoring Employer
- Voluntary resignation
- Termination
- Permanent layoff or retirement
- Death
- Disability
- Financial Hardship
Depending on your plan document, you may qualify for a financial hardship withdrawal if you have an immediate and heavy financial need to:
- Pay college tuition that is due in the next 12 months for you or a dependent.
- Make a down payment on your primary residence.
- Pay medical expenses for you or a dependent.
- Prevent foreclosure or eviction from your home.
- QDRO
A Qualified Domestic Relations Order is a court order that outlines the
requirements for splitting 403(b) funds in the case of a divorce. A QDRO should be specific and
detailed, including: either a percentage or dollar amount to be distributed to the ex-spouse
or other designated alternate payee; the date of the account valuation; how the money should
be distributed; and, if taxes are applicable, who has the responsibility to pay the taxes.
It is always best to seek the assistance of an attorney who is knowledgeable in drafting QDROs.
Consulting an attorney may save you time and additional expense in making sure the QDRO is acceptable upon first
submission.
Some distributions prior to age 59˝ are subject to an additional 10 percent early withdrawal
penalty from the IRS. Check with your financial professional or tax advisor to see if you
are liable for the 10 percent IRS penalty or if it is waived.
This Web site is not intended or written to be used as
legal or tax advice. As a taxpayer, you cannot use it
for the purpose of avoiding penalties that may be imposed
under the tax laws. You should seek advice on legal or tax
questions based on your particular circumstances from an
independent attorney or tax advisor.
*Statistics compiled from the 2004 Retirement
Confidence Survey, Employee Benefit Research
Institute; and
"Coming Up Short: The Challenge of 401(k) Plans," Alicia Munnell
and Annika Sunden
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