The 403b was created as a tax-deferred retirement plan in the US.
There is a 403b early withdrawal penalty. Generally, if a person is not retired or under the age of 59.5, he will be subject to a 10% tax on the money withdrawn. However, if the fund owner retires before the age of 55, it is possible to receive the money in payments. For non-retired individuals under the age of 59.5, it is sometimes possible to obtain a 403b early withdrawal loan to avoid early withdrawal penalties, but this should be done with caution as it can have serious financial consequences.
The 403b was created in 1958 as a tax-deferred retirement plan in the United States. It is available to employees of certain nonprofit organizations and to employees of educational institutions such as teachers, school administrators, and librarians. No taxes are paid on the money before it is placed in the 403b plan.
In general, to withdraw money from the 403b plan, a person must be over the age of 59.5. Withdrawals can also be made if the person retires or is disabled. If the owner of the plan dies, the beneficiaries can receive payments.
Those who retire before age 55 are eligible for 403b early termination without penalty, but the plan owner must consent to a substantially matching periodic payment program (SEPP). Under this program, the owner will receive a series of payments that must continue until he turns 59.5. If the owner is under five years of age 59.5, he must continue payments for five years from the start date.
Another option for a penalty-free 403b early withdrawal is to take out a loan. Fund owners should consult a financial or tax professional before applying for a loan from a 403b fund, as there are some risks associated with loans. Most 403b early retirement loans must be paid back within five years. The exception is if the loan is used to pay off a home, then the homeowner has 30 years to pay off the loan. Taking out a loan will decrease the amount of money accumulated until retirement, since the amount of the loan does not count towards the base amount on which the interest is calculated. If the homeowner defaults on the loan, the loan balance will be assessed a 10% penalty rate.