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My wife called Life of the Southwest and was asking to withdraw funds and she was told that she could not withdraw her money. Is this correct?
403b Question
- Thread starter SouthernComfort
- Start date
- 8,707
Is she still employed by that employer? If yes then she can not withdraw funds until she is 59 1/2 years of age. She may be able to take a loan or a hardship distribution IF the plan document allows for it AND the policy or contract also allows for it.
- 11,995
What if she was leaving the employer?
- Thread starter
- #4
- 396
The contract has the normal withdrawal definition. Where is shows the decreasing withdrawal penalty and the statement that if she does make a withdrawal prior to age 59.5 then it will be subject to an additional 10% on top of her current tax rate. Not on any signed document does it say she can not withdraw funds until age 59.5.
- 10,326
A 403b has restrictions other than just what the product used has. One being that you must be 59.5 to access it. This is a government regulation.
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She could transfer to a new product but all the gov regs stay the same.
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She could transfer to a new product but all the gov regs stay the same.
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- 8,707
Actually if she seperated from employment she could rollover to an IRA which does change the rules regarding access.
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The easiest way to think about it is that the 403b is an employer sponsored retirement plan. Without being an employee of a nonprofit or public school your wife would not have been able to do the salary deferred contributions to the 403b. The 403b regs say she can not access the funds unless she has seperated from the employer, or is at least 59 1/2 if still employed.
There is the ability for loans subject to the plan document allowing them and the loan is limited to typically 50% of the account value up to a total loan of 50k and must be repaid within 5 years unless used for the purchase of the primary residence but once again is subject to the plan document.
There is also the ability for financial hardship withdrawals if still employed and under 59 1/2. If allowed it is limited to post secondary education expenses, principal residence purchase, medical expenses or to stave off eviction or foreclosure. To use the hardship must be a heavy burden that can not be met in other means is limited to contributions does not typically allow for distributions of gains and requires the participant to cease contributions for a 6 month period.
What you saw about decreasing surrender charges and taxes apply IF she is able to make a withdrawal.
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If she was retiring, she could access the funds penalty free (still subject to income taxes) at age 55. There are a number of other ways to gain access prior to 59 1/2 w/o penalty as well (death, disability, SEPP etc.)...
As Norwayguy points out, she could also roll to an IRA.
- 8,707
Dang it I forgot to mention disability. SEPP (Substantially equal periodic payments) could only be done with seperation or attained age of 59 1/2...I know I tried 72t distributions on employed participants.
I was responding to Josh's post on separation. If you're still employed, you have few options (short of the one's you've already highlighted) to access your money.
- 8,707
Never asked the OP does your wife want cash or other options. She may be able to do a contract exchange to another approved provider. What she really needs or you need is to get a copy of the plan document. The district may have it listed on its website.
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