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VAteacher

Age You Can Begin Distributions From 403B

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Hello,

I have found conflicting information on when distributions can be begin from 403b accounts.

 

According to some sources, such as the 403b FAQ on 403bwise, I read that, in order to take distributions before age 59 1/2 penalty free, you have to separate from your employer (retire/quit) in or after the year in which you reach age 55.

 

However, according to my recent 403b custodial account agreements I have with Vanguard and Valic, and what I've found on the IRS web page, it appears that you can start distributions at ANY AGE prior to age 59 1/2, as long as you have separated from your employer. Nothing about age 55 is indicated at all. Perhaps this is the up to date rule, as changed starting Jan. 1, 2009.

 

Does anyone know what the truth is? After separating from your employer, can you withdraw funds from your 403b penalty free at ANY age?

 

thanks,

VAteacher

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I did some research and I'm finding conflicting answers too. I think when you seperate you can pull the money but you'll have to roll it over into an IRA to avoid IRS penalties. I think you have to be 55 in order to actually start using the money directly to fund your retirement.

 

I can see why you are confused I am too now .

 

 

tony

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I did some research and I'm finding conflicting answers too. I think when you seperate you can pull the money but you'll have to roll it over into an IRA to avoid IRS penalties. I think you have to be 55 in order to actually start using the money directly to fund your retirement.

 

I can see why you are confused I am too now .

 

 

tony

 

 

 

Here is what can be done in many plans. (first, though, review your plan document, or contact the plan administrator to make sure all the options apply--"in service distributions" are an option under 401K plans, for example, and are not automatically available)

 

If you separate from service before 55, you can access the 403b account and be subject to taxes and the tax penalty for early distributions, or roll the account to an IRA or another qualified plan with your new employer to avoid the taxes and penalties

 

If you separate from service after 55, you can access the 403b account, be subject to taxes, but avoid the early distribution tax penalty, or, as above, you can roll the account into an IRA or another qualified plan with your new employer

 

You can access the account after age 59 and half while still employed with your current employer while taking an in-service distribution, pay the taxes and avoid the tax penalty

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One more caution, if you separate from service prior to age 59 and half, you can roll the retirement account into an IRA to avoid taxes. HOWEVER, once the account is an IRA, it is subject to IRA rules. That means there are no loans. But, there is a bigger concern, if you access your newly minted IRA before you are 59 and half, you will have to pay the taxes and the tax penalty. This comes into focus if you separate from service after 55, when you can avoid the tax penalty. If you take a distribution of the 403B funds then, at 55, you will pay the taxes but AVOID the penalty. But, if you put the money into an IRA, then change your mind, and take a distribution from the IRA between 55 and 59 and half, the taxes AND the penalty will come back. Think carefully --if you roll money into an IRA, it is subject to IRA rules.

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