Financial/investment question

[jcbell1007]

Looking into cashing out my 403(b) retirement plan as I've moved onto a new job and hit a small snag with something. Without going into great detail, what's the best way to go about cashing one of these out? Contributions were made pre-tax, similar to a 401(k) plan. The investment company is Fidelity. If there is a way that I could avoid penalties, that would be great. I've heard about claiming a hardship, but can't find details or requirements on their website.

who's got some experience or ideas on this?

[slammp]

if its the same as 401k you can pull a hardship but you have to pay the taxes you never did when you invested the money - the plan will take that off the top and distribute the difference.

[Rosco61]

You could transfer the 403b into your new 401k at the new company. then take a loan against the 401 that you can repay without taking the hit with the criminals running the government. just a thought. oh and 0 interest that way too.

[jcbell1007]

Anything specific on what constitutes a hardship? that's what I couldn't find details on.

Rosco, new employer has a define contribution plan (read pension) that I can't roll the 403 over into. The main difference between a 403 and a 401, is that a 403 is part of a non-profit, public sector employer (ie: a college). The loan only lets you access a small portion of your account, I believe it's only about 20%. I'm looking to cash out the entire thing, thanks for the thought though.

[slammp]

The following items are considered by the IRS as acceptable reasons for a hardship withdrawal:

Un-reimbursed medical expenses for you, your spouse, or dependents.
Purchase of an employee's principal residence.
Payment of college tuition and related educational costs such as room and board for the next 12 months for you, your spouse, dependents, or children who are no longer dependents.
Payments necessary to prevent eviction of you from your home, or foreclosure on the mortgage of your principal residence.
For funeral expenses.
Certain expenses for the repair of damage to the employee's principal residence.
Hardship withdrawals are subject to income tax and, if you are not at least 59½ years of age, the 10% withdrawal penalty. You do not have to pay the withdrawal amount back.

A hardship distribution may not exceed the amount of the need. However, the amount required to satisfy the financial need may include amounts necessary to pay any taxes or penalties that may result from the distribution.

[jcbell1007]

thanks for that, I couldn't find that when I did a search on fidelity's site.

looks like i'm gonna get porked with the 10% penalty then.

[cbr_chick_nh]

This makes me glad I have a financial advisor ...

Hope NESR can help you out on this one.

[ThisBitch]

Ok...

Why are you cashing it out?

Actually, just PM me. I am a financial advisor.

[kellis159]

Take my info with a grain of salt... If you're cashing out your 403b , you shouldn't need to do anything regarding a hardship - it'll just be distributed in full... be prepared for a 20% tax withholding and when you do need to file, you'll get slammed a 10% penalty.

Hardship withdrawals('least with my experience) allowed you to tap into a larger amount to withdraw than normally. It also held the option to not have the automatic 20% tax withholdings that usually are withheld with a normal withdrawal. Hardship does not alleviate the taxes due or the 10% penalty(bend ovah). I've had to do two over the past 5 years 'n it sucks all around financially - avoid it if you can.

If at all possible, the most ideal was mentioned above - roll it into a retirement account(staying with Fidelity is a pretty good choice) and then take a loan out against it. Any withdrawal is going to hit you hard.

If you decide not to withdraw - you may want to discuss rolling into a Roth with a financial advisor - just to mix things up.

Good luck...

[JayWalk]

thanks for that, I couldn't find that when I did a search on fidelity's site.

looks like i'm gonna get porked with the 10% penalty then.

10% is just the penalty...you will also owe an additional 25% or so in taxes. So basically you will be brining in 2/3 or so of what you are cashing out.

[BMFR6]

PM Jackie. Depending on what you need, your best bet if you absolutely have to cash it out would be rolling to an Ira first. Gives you more control of the taxes at distribution, but you'll still get screwed in the end. Hardship reasons are a little different between the 403 and the Ira so talk to her first.

[highsider]

Your new job sucks. Congrats anyway.