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403b Withdrawal At Age 55


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#1 ladydlc

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Posted 19 November 2008 - 09:57 PM

I am a public school teacher with a 403B from AIG/Valic. I will turn 55 in December 2008 and plan to retire in June of 2009. Is there a penalty for closing the account and withdrawing all my money when I retire? Can I withdraw the money 2 months before retiring (without penalty) as long as I am 55 and will definitely retire?

#2 sschullo

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Posted 20 November 2008 - 06:54 AM

QUOTE(ladydlc @ Nov 19 2008, 09:57 PM) View Post

I am a public school teacher with a 403B from AIG/Valic. I will turn 55 in December 2008 and plan to retire in June of 2009. Is there a penalty for closing the account and withdrawing all my money when I retire?

No, as long as the withdrawl is after you retire.

Can I withdraw the money 2 months before retiring (without penalty) as long as I am 55 and will definitely retire?

No, since you are younger than 59.5, you must be separated from service.



#3 intruder

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Posted 20 November 2008 - 12:19 PM

QUOTE(ladydlc @ Nov 19 2008, 09:57 PM) View Post

I am a public school teacher with a 403B from AIG/Valic. I will turn 55 in December 2008 and plan to retire in June of 2009. Is there a penalty for closing the account and withdrawing all my money when I retire? Can I withdraw the money 2 months before retiring (without penalty) as long as I am 55 and will definitely retire?


See if you can take out a loan before you retire for the amount of the distribution. When you retire the loan balance will be deemed a distribution if it is not repaid but there will be no penalty tax because the date of the loan distribution will be after your retirement date. Only downside is that you may have to pay a fee to take out the loan.

You also need to determine if any back end charges will be imposed by the insurance company when you receive the funds even if there are no tax penalities.


#4 sschullo

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Posted 20 November 2008 - 03:39 PM

Lady,
Intruder makes a good point about surrender fees (back end charges). Those fees can be high.
Steve

#5 JudyS

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Posted 20 November 2008 - 07:40 PM

Lady --
And you will have to pay income taxes on the $$ you withdraw. However, you're able to roll your $$ over into an IRA once you retire w/o taxes.
JudyS