Question

IN 2016 I ROLLED Over money in a 403b from a job I left to my new job's 403b. In 2018 I withdrew that money from my current 403b I am not 59, will I pay the 10% penalty

Forum|Forum|7 years ago
June 5, 2019
5 replies
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TurboTax Free Edition Online

This was not a hardship loan. And the only amount to withdraw was that from the rollover. I’m in my 30’s so no where near retirement age. I’m still curious about the penalty and if there will b one

O

Opus 17

Employee

I still don't see how you withdrew money from a 403b while still employed with the second plan sponsor. Did you roll the money into an IRA instead?

In any case, you are clearly subject to the 10% early withdrawal penalty on top of the regular income tax.

J

jenn-jordanAuthor

I’m not sure why it was allowed either it was available on my 403b website so I did it. I did the 2018 estimate on turbo tax which included the amount withdrawn from my 403, does my estimated refund include the penalty?

O

Opus 17

Employee

For a 403b, you generally are not allowed to make a withdrawal as long as you are employed with the company or university, except for hardship withdrawals.

If you separated from service and are 55 or older, you don't pay the 10% penalty for a 403b or 401k. If you are younger and took a hardship withdrawal, the penalty applies. (I'm actually not sure what happens if you are over 55, but still working for the company and take a hardship withdrawal.)

D

dmertz

Employee

Since you are under age 59½, if you are still working for the new employer you are subject to the 10% early-distribution penalty unless some exception other than the age-55 exception applies. If you separated from service with the old company in or after the year you reached age 55, you could have taken a penalty-free distribution from the old employer's plan, but that opportunity was erased when you rolled the money over to the new employer's 403(b).

If the amount rolled over into the new plan and any earnings thereon are separately tracked in the new plan, the plan can permit the early-distribution of the separately tracked portion, depending on the terms of the plan, but the age-55 exception would only be available after you separate from service with the new employer.