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How a Traditional 403b Works
If you save in the Traditional 403(b) plan, your contributions and any growth, dividends, or earned interest will accumulate tax deferred until you withdraw funds, usually at retirement. Then income is taxed only as funds are withdrawn and generally taxed as ordinary income. You can make contributions to a 403(b) plan only by a salary reduction agreement with your employer. The amount you save or invest in the plan is called an elective deferral. With a Traditional 403(b), the amount you contribute is deducted from your paycheck before taxes are taken out by your employer. The money is then forwarded to the custodial investment firm that manages your money.
When can I take a distribution from this plan?
Generally, you may request a distribution when you reach retirement age, terminate your employment with the employer, or become disabled. A qualifying event is required to permit distribution of your account balance.
403b Plan Qualifying Events:
Can I get money from the plan while I am still employed?
Depending on the provisions of the custodial account or annuity contract you select to hold your contributions, certain other distributions may be allowed, such as Hardship withdrawals for certain financial emergencies; In-Service withdrawals if you are at least 59 ½ years old; and Loans.
Will I be taxed on my distribution?
Can I exchange/transfer/rollover my accounts to a new custodial account or annuity contract?