§403(b)/Roth §403(b) Distributions
Traditional §403(b) Accounts
Most employer plans allow §403(b) account assets to be withdrawn without penalty after age 59½.1 Upon withdrawal, ordinary income taxes will apply. Distributions must begin no later than April 1 of the calendar year following the calendar year in which you attain age 70½, or upon retirement, whichever occurs later. §403(b) plan participants who have terminated employment under the age of 55 may begin distributions through an IRS provision known as a §72(t) distribution to avoid the 10% premature penalty.2 Contact your Legend Advisor for details.
Any of the eligible distributions discussed above may be rolled into a Roth §403(b) Account in your plan. You will incur ordinary income tax liability on the amount converted but no premature penalty will be assessed.
Roth §403(b) Accounts
Tax-free Roth §403(b) distributions may begin at age 59½ if you are eligible for the distribution under your employer's plan.3 While regular §403(b) account distributions are mandatory at age 70½, Roth §403(b) distributions are not mandatory until the participant’s death if the account is rolled over to a Roth IRA. This strategy enables you to create a tax-free financial legacy for your heirs.4 Your Legend Advisor can assist you in completing this task.
1Distributions from a traditional retirement account are subject to ordinary income taxes in the year distributed. Distributions prior to age 59½ may incur an additional 10% penalty.
2Legend Equities Corporation and its affiliates do not provide tax information or advice. To take advantage of the §72(t) provision, one must adhere to the established payment schedules (monthly, quarterly, annually) chosen for at least five years or until age 59½, whichever comes later. The exact amount must be withdrawn each year; a variation will result in a 10% penalty being applied retroactively.
3In order for the Roth §403(b) account to be distributed tax-free, it must be funded for a minimum of five years and the account holder must have attained age 59½. A participant would also qualify for tax-free distributions if the account was held for five years and the account owner became disabled (under the strict definition of disability of §72(p) of the IRS code). Furthermore, in the event of the account holder’s death, beneficiaries would receive tax-free distributions if the account was held for at least five years. Otherwise, the distribution would be treated as part return of principal and part taxable earnings. A 10% premature withdrawal penalty may apply to the earnings.
4Legend Equities Corporation and its affiliates do not provide tax, estate planning or legal information or advice.