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Bill
Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3078
Experience:  EA, CEBS - 34 years experience providing financial advice
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I am thinking of cashing out my underperforming 403b with TIAA

Resolved Question:

I am thinking of cashing out my underperforming 403b with TIAA CREF. I have $32K in it and want to witdraw $30K to use as a down payment on a home. My question is, what kind of taxes and penalties will I be forced to pay in order to witdraw $30k ???

My gross income for 2009 will be $65K salary, plus $10,000 in freelance income after I account for taxes against the freelance work.

I am single, age 50, no dependents, and a first time home buyer.

Many thanks,

XXXXX XXXXX
Submitted: 4 years ago.
Category: Tax
Expert:  Bill replied 4 years ago.
If you are still working for the employer sponsoring the 403(b) then you can only take a distribution if it is for a hardship and it meets the plan's definition of a hardship. If you take $30,000 then the federal income taxes will be approximately $7,902 (26.3%) and you will also owe a 10% penalty tax ($3,000) because you are under age 59 1/2.
Customer: replied 4 years ago.
Thanks - I was planning on using the "hardship" issue. My father lost his home and needs somewhere to stay. I plan on buying the house to make sure he has somewhere to live. Is this "good enough" to qualify as "hardship" ?
Expert:  Bill replied 4 years ago.

Withdrawing the funds to purchase a home does meet the definition of a hardship and assuming you have no other resources available to meet the hardship. See the links below:

 

http://www.irs.gov/retirement/participant/article/0,,id=211439,00.html

 

http://www.irs.gov/retirement/article/0,,id=162416,00.html

 

Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3078
Experience: EA, CEBS - 34 years experience providing financial advice
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