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lucas90

Taking Our 403b Money Out Before Age 59.5

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My wife and I have money invested in 403b's. We've both retired from teaching as part of our state's early retirement option. I've been told that we can access the 403b's (without paying the 10% penalty) because we have ended service with our employers (we are not 59.5 years of age). I have also heard that we must still wait until we are 59.5 because the rule is ...403b money can be accessed with separation of service, or when we become 59.5... WHICHEVER IS LATER! HMMMM??? Which is it?

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You can access money now and will not be subject to IRS early withdrawal penalty.

 

From the 403(b)wise FAQ section:

 

When am I eligible for a distribution from my 403(b)?

If you withdraw assets prior to age 59-1/2, the IRS will impose a 10 percent penalty tax, in addition to the normal tax consequences, unless you meet one of the following criteria:

 

Attain age 59-1/2

Separate from service in or after the year in which you reach age 55

Part of a series of substantially equal periodic payments for your life or the joint lives of you and your designated beneficiary

Hardship

Disability

Death

Made due to an IRS levy upon your participant account

Paid to an alternative payee under a qualified domestic relations order

Is a qualified reservist distribution as defined under the Pension Protection Act of 2006

Is a payment of qualified medical expenses greater than 7.2% of your adjusted gross income

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Although you/your wife may qualify for this exception to the 10% penalty, if you make awithdrawal request before age 59.5, it may be prudent to provide the 403(b) provider with an additional letter to accompany your withdrawal request forms. The letter should state that you/your wife are exempt from 10% penalty under section 72(t) of the Internal Revenue Code since your/your wife’s separation from service occurred in or after the year in which you/your wife reach age 55. That way the 403(b) provider should know to process any withdrawals made with a distribution code “2 - Early distribution, exception applies” for the purpose of the IRS Form 1099-R tax statement.

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