Table of Contents

Withdrawing from a 403(b) plan

What is a hardship withdrawal?

403(b) hardship withdrawal rules

Taking a loan from your 403(b) plan

Alternatives to withdrawing money from a 403(b) plan

The bottom line

Learn403(b)403(b) Withdrawal Rules & Alternative Options

403(b) Withdrawal Rules & Alternative Options

Jun 21, 2022


7 min read

403(b) and 401(k) accounts are designed to help prepare you for retirement. It’s not hassle-free to withdraw money from one, but that doesn’t mean you can’t.

Life is unpredictable. You’ve heard it once and you’ll hear it again — you know it for yourself, too. No matter how much time we spend planning for the future, circumstances may arise that require our plans — and finances — to shift.

If you find yourself in a financial emergency and need access to extra liquid cash, you might decide to withdraw money from your retirement account. But realistically, even though a retirement account — such as a 401(k) or 403(b) — technically holds your money, withdrawing from one of these accounts isn’t comparable to withdrawing money from your savings or checking account. These accounts (including all of their benefits) are designed to encourage you to leave them alone until you’re ready to retire. If you do decide to withdraw money from a retirement account before retirement, you may incur additional taxes or fees.

At Titan, we are value investors: we aim to manage our portfolios with a steady focus on fundamentals and an eye on massive long-term growth potential. Investing with Titan is easy, transparent, and effective.

Get Started

Withdrawing from a 403(b) plan

According to the IRS, there are several circumstances that would allow a person to withdraw money from their 403(b) plan (the employer-sponsored retirement plan available to employees at non-profit organizations and public schools). In some cases, withdrawal requires you to pay a fee of 10% on the amount withdrawn, but there are other circumstances that allow you to bypass this fee.

It’s worth noting that with a traditional 403(b), you will pay regular income taxes on the amount you choose to withdraw to compensate for the fact that the money was put into the retirement account before any taxes were withheld. In the case of a Roth 403(b), however, there is no income tax owed on withdrawals in retirement, because the individual pays income tax on the funds when they save them.

You can take money out of a 403(b) account without paying a penalty fee in the following circumstances:

  • You reach age 59 ½.

    If you are 59 ½ years of age or older, any money withdrawn from your traditional 403(b) account will count as income and is taxed at your regular tax rate.

  • If you reach age 55 and leave your employer.

    If you are 55 years of age or older and choose to leave the employer sponsoring your retirement plan, you can access the money in your 403(b) without paying a penalty. Keep in mind that if you withdraw from a traditional 403(b) (rather than a Roth 403(b)), you will still have to pay taxes on the amount you withdraw.

  • If you become disabled.

    If someone is found to be totally and permanently disabled as defined by the IRS, they can withdraw from their 403(b) without paying a penalty. However, they will still owe income taxes.

  • If you pass away.

    If a retirement plan participant dies, their designated beneficiaries can withdraw money from their 403(b) without penalty, but they will still owe taxes on the amount they withdraw.

There are other circumstances that allow an individual to take money out of their 403(b), but these particular circumstances also require that the individual pays a penalty of 10% on the amount withdrawn in addition to regular income taxes. These include:

  • If you leave your employer and withdraw money.

    If an individual decides to quit their job, they can roll over the amount in their 403(b) plan into another tax-deferred account such as a 401(k) plan. If an employee decides against a rollover and withdraws the money as a distribution without meeting an exception (such as disability or reaching retirement age), this withdrawal will result in a 10% penalty on top of regular income taxes.

  • Financial hardship.

    Retirement plans like the 403(b) allow individuals to withdraw money in certain cases of financial hardship, but this also results in a 10% penalty in addition to income taxes.

What is a hardship withdrawal?

Some 403(b) plans allow for an early withdrawal in the form of a hardship withdrawal . If a person is facing financial stress (e.g., large medical bills, a house foreclosure, etc.) and has no other liquid assets to pay for the expense, they can use the funds in their 403(b) to help cover the cost. However, cases of hardship withdrawal are still subject to the 10% penalty as well as regular income taxes. According to the IRS, circumstances that meet the definition of an immediate and heavy financial need include:

  • Large medical expenses.

    Any large medical bills for an individual, their spouse, dependents, or beneficiary.

  • Buying a primary residence.

    Funds needed for a down payment and associated costs when you are purchasing a principal residence.

  • Educational expenses after high school.

    Tuition, fees, and room and board for 12 months of education expenses after high school. You can apply the withdrawn funds to your own education expenses, or for education expenses for your spouse, children, dependents, or beneficiary.

  • Avoiding eviction or foreclosure.

    Funds used to avoid eviction or foreclosure of your primary residence.

  • Fixing damage to your primary home.

    Costs of fixing damage to the home you live in.

  • Funeral expenses.

    Funeral expenses for you, your spouse, children, dependents, or beneficiary.

403(b) hardship withdrawal rules

In order to initiate a hardship withdrawal, you must be facing a large and urgent financial expense. Whether or not an individual’s circumstances meet this requirement is determined by their employer. An employer will review your circumstances and judge whether your financial need is pressing enough to merit an early withdrawal.

You can only withdraw money that you or your employer contributed to your 403(b) account, which means that you cannot withdraw any of the earnings you’ve made on those deposits. (This is notably different from the rules governing early 401(k) withdrawal.) If granted permission to make a hardship withdrawal, you can only withdraw the amount you need in order to cover the expense at hand.

Taking a loan from your 403(b) plan

If your specific 403(b) retirement plan allows it, you can actually take a loan out from your plan. In this case — even though you would be borrowing from your own funds — you would still need to pay interest on the loan. The loan’s interest rate would be set by a plan administrator based on the market rate.

You can borrow up to $50,000 or 50% of their vested funds balance — whichever is less. In order to apply for a loan, you have to contact your plan’s administrator. The account’s vested funds balance may be different from its actual balance if the employer makes contributions that do not belong to the employee until after those funds vest.

Repaying a loan on your retirement account is easy since payments are automatically withdrawn from your paycheck, just like contributions to the retirement account are (although payments do not need to be made each paycheck). The loan’s terms determine when payments are due, but you are required required to make at least quarterly payments.

A loan on your retirement account must be paid back within five years unless the money was used to purchase your primary home. In that case, the IRS allows the loan length to be as long as 15 years. As long as the loan’s terms — including the amount of payments and their due dates — are adhered to, you will not incur taxes for the loan. However, if payments are late or not made, the outstanding balance can be taxed as a distribution.

Alternatives to withdrawing money from a 403(b) plan

The consequences of withdrawing from a retirement account exist to encourage you to keep money in the account. Unless you’ve weighed the pros and cons of withdrawing money from your 403(b) plan, for instance, and have concluded that the pros of withdrawing outweigh the cons based on your personal financial philosophy, it’s usually in the average American’s best interest to avoid withdrawing money from a retirement account. If you’re looking for other ways to cover unexpected expenses before retirement, you might consider:

  • Using emergency savings.

    It is best financial practices to have liquid savings worth at least six months of expenses. You can lean on these funds when you find yourself facing unexpected financial hardship.

  • Borrowing money.

    To cover unexpected expenses, you can choose to obtain a personal loan from a bank or apply for a credit card. Homeowners can also apply for a home equity line of credit or investigate refinancing their mortgage to borrow more money. Of course, there are also disadvantages to taking on debt, but paying interest on your debts might end up saving you more money than withdrawing from your retirement account early.

The bottom line

Withdrawing from a retirement account, transferring your retirement savings, investing for your future — all of the nuances around personal finance can feel so complicated. That’s why we built a concierge team to make managing your finances — and saving for retirement — easier. Rollover your retirement accounts to a Titan Traditional IRA for more seamless money management, as well as more control over your account’s underlying investments. Get started today.


Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Titan has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any strategy managed by Titan. Any investments referred to, or described are not representative of all investments in strategies managed by Titan, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see Titan’s Legal Page for additional important information.

Three Things, a newsletter from Titan

Stay informed on the most impactful business and financial news with analysis from our team.

You might also like

How to Rollover a 403(b) to a New Retirement Plan

A rollover can be an easy way to transfer funds from an old 403(b) into a new retirement account. Rolling over a retirement account can be a smart move for an investor.

Read More

403(b) vs. Roth IRA: Similarities and Differences That Affect Your Retirement

A 403(b) and a Roth IRA provide investors with ways to save for retirement. Their major differences include their tax treatment and who can access them.

Read More

403(b) vs. 401(k): Differences That Affect Your Long-Term Retirement Planning

Having a 403(b) or 401(k) plan can be beneficial when saving for retirement. Both are tax-advantaged accounts that provide high contributions to accomplish that goal.

Read More

How 403(b) Catch-Up Contributions Work

Participants in a 403(b) who are age 50 and over or who have more than 15 years of service may be able to go above the standard annual contribution limits set by the IRS.

Read More

Cash Management

Smart Cash

Smart Cash FAQs

Cash Options

Get Smart Cash


© Copyright 2024 Titan Global Capital Management USA LLC. All Rights Reserved.

Titan Global Capital Management USA LLC ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept and agree to Titan’s Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities or investment products. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections are hypothetical in nature and may not reflect actual future performance. Account holdings and other information provided are for illustrative purposes only and are not to be considered investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.

Please refer to Titan's Program Brochure for important additional information. Certain investments are not suitable for all investors. Before investing, you should consider your investment objectives and any fees charged by Titan. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested, including principal. Brokerage services are provided to Titan Clients by Titan Global Technologies LLC and Apex Clearing Corporation, both registered broker-dealers and members of FINRA/SIPC. For more information, visit our disclosures page. You may check the background of these firms by visiting FINRA's BrokerCheck.

Various Registered Investment Company products (“Third Party Funds”) offered by third party fund families and investment companies are made available on the platform. Some of these Third Party Funds are offered through Titan Global Technologies LLC. Other Third Party Funds are offered to advisory clients by Titan. Before investing in such Third Party Funds you should consult the specific supplemental information available for each product. Please refer to Titan's Program Brochure for important additional information. Certain Third Party Funds that are available on Titan’s platform are interval funds. Investments in interval funds are highly speculative and subject to a lack of liquidity that is generally available in other types of investments. Actual investment return and principal value is likely to fluctuate and may depreciate in value when redeemed. Liquidity and distributions are not guaranteed, and are subject to availability at the discretion of the Third Party Fund.

The cash sweep program is made available in coordination with Apex Clearing Corporation through Titan Global Technologies LLC. Please visit for applicable terms and conditions and important disclosures.

Cryptocurrency advisory services are provided by Titan.

Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.

Contact Titan at 508 LaGuardia Place NY, NY 10012.