How to Withdraw Funds From a 403(b) Retirement Account

403b accounts are designed to accumulate tax-free funds.

There are a number of retirement accounts available to Americans. In addition to the popular 401k and IRA plans, there is the 403b tax-sheltered annuity plan. It is similar to other retirement plans and is available to certain employees of public schools, tax-exempt organizations and ministers. If you have to take money out of your 403b plan, you need to carefully review the rules, especially if you are withdrawing before retirement.


Step 1

Review the rules of your 403b plan. Determine the reason for the withdrawal. If you are at retirement age, you must contact the investment company housing your 403b and arrange disbursements. Generally, your two options are installment plans (where you are paid a fixed amount over time) or a lump-sum distribution (where you take all funds and reinvest).


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Step 2

Pay special attention to the early-withdrawal rules if you are retrieving funds before you reach retirement age (usually 59½). Most 403b plans impose heavy penalties for early withdrawal. Generally, you can expect to pay at least a 10 percent withdrawal penalty and full taxes (at least 20 percent) on the entire disbursement. Contact your investment company for full rules.


Step 3

Check your deployment arrangement if you are about to be deployed as a member of the U.S. Army Reserves. If you are to be sent on deployment for 179 days or more, you can make a tax-free, penalty-free disbursement from your 403b. These disbursements are normally limited to 50 percent of the 403b's value.


Step 4

Contact both your employer and your investment company to make a withdrawal. Unlike 401k and IRA plans, only your employer can set up a 403b plan. Therefore, your employer must be made aware of any withdrawals from the plan.


Step 5

Apply for a withdrawal directly through your investment company once you clear the withdrawal with your employer. If you haven't already, create an online profile so you can access your 403b account online. You'll need to provide your name, date of birth, Social Security number and 403b account number.


Step 6

Make sure the benefits of any distributions (especially early-withdrawal distributions) outweigh the negative effects on your retirement plan, particularly any penalties. Ask your investment company if 403b loan programs are available. These are rare.



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