403b and age 55 withdrawals
I have two 403(b) accounts.
One 403b account is with my current hospital employer and the second 403b account is with my previous hospital employer.
I turned 55 in February of this year (2013).
If I retire this year [say November 2013] from my current employer, can I combine both of my old 403b accounts into one new 403b account with a custodian unaffiliated with either my current employer or my previous employer and take withdrawals from the new 403b account and get the age 55 exemption from the 10% penalty tax?
If I retire in November of this year and leave both of my existing 403b accounts as-is (i.e. I do not transfer them to another 403b), can I take withdrawals from either of my two old 403b accounts and avoid the 10% penalty? Would I still get the exemption if I start working for a 3rd hospital next year after “retiring” from my current hospital?
Permalink Submitted by Alan - IRA critic on Wed, 2013-10-02 21:37
The only way you can get the age 55 penalty exception is to take distributions directly from the 403b plan of your current employer after you separate from service. You cannot get the exception on your former employer 403b plan, or from a new custodian or from an IRA rollover account. Further, you need to determine what flexibility your current 403b offers in taking these distributions. For example, if they require you to take a lump sum distribution, having 5 years worth of income in a single year will raise your tax rate and offset the advantage of the penalty waiver. And if you started working for a 3rd hospital after taking penalty free distributions from your current 403b plan, you could still continue the penalty free distributions from your current plan, although you may not need to take any distributions if you were working full time again.
Permalink Submitted by Robert Wright on Sun, 2013-10-06 14:59
Thanks Alan.