403(b) Retirement Plan

Withdrawal Restrictions

Your employer's 403(b) plan may have restrictions for withdrawing assets from their 403(b) plan. Check with your employer for details about the withdrawal provisions allowed by their plan. If you meet the requirements for withdrawing from your employer's plan, there are several guidelines to consider before making a final decision.

Since 403(b) plans were created to help you save for retirement, there may be stiff penalities for withdrawing money early. If you do, you'll owe:

arrow Income taxes on the total withdrawal
arrow A 10% penalty if you're younger than 59 1/2
arrow 20% federal income tax withholding unless the entire amount is rolled over to another qualified retirement plan

Common Questions

Q: Will I be required to pay taxes on my withdrawal?

A: Since no income tax has been paid on the payments to your account, you would need to report your withdrawals as income on your income tax return. A 10% federal surrender fee will also be due on the amount withdrawn unless it is:

  • Made after age 59 1/2
  • Made after severance from employment (after age 55)
  • Made on account of your death, disability, Qualified Domestic Relations Order (QDRO), or made in substantially
    equal payments over your lifetime.


Q: When will my contributions be available for withdrawal?

A: Withdrawals are available if you meet one of the following conditions and are subject to employer plan rules:

  • You reach age 59 1/2
  • Your death or total disability
  • Separation from service
  • Severe financial hardship (limited to contributions only)
  • Qualified Reservist Distribution1
  • Qualified Domestic Relations Order (QDRO)2


Q: What qualifies as a hardship?

A: Harship distributions are an immediate and heavy financial burden caused by one of the following events:

  • Purchase of a primary residence
  • Payment of rent or mortgage to avoid evictions or foreclosure
  • Funeral expenses for an immediate family member of employee
  • Uninsured and unpaid family medical expenses
  • Payment of the next 12 months of unpaid post secondary tuitions and related education fees

Note: Hardship withdrawals are not allowed for credit debt or student loans

1To qualify for the exception, the reservist must be called to activate duty for more than 179 days and the withdrawal must occur while the reservist is serving on active duty. These early withdrawals may still be subject to state and federal taxes.

2A type of court order typically found in a divorce agreement that recognizes that the ex-spouse is entitled to receive a predefined portion of the individual's retirement plan. In most caess, the qualified domestic relations order (QDRO) allots 50% of the value of the assests gained from the beginning of the marriage to the time of the divorce to the ex-spouse.