What happens if you cash out a 403(b) early?

In Topic 558, the IRS describes early distributions as money you receive from qualified retirement plans before you are 59 1/2 years old. Cashing out your 403 (b) before you reach 59 1/2 typically results in penalties. Aside from ordinary income taxes due on the money you receive, you must also pay a 10 percent early withdrawal penalty.

Can I make early withdrawals from a 403(b)?

However, you may be subject to a 10% penalty on the withdrawal on top of any income taxes owed. In some cases, however, you can make early withdrawals from a 403 (b) without paying a penalty. Similar to a 401 (k), 403 (b) account holders can start taking distributions in the year they leave work as long as they turn 55 or older in that same year.

What is a 403(b) early withdrawal penalty?

The amount of the early withdrawal penalty from a 403 (b) retirement account is typically 10% of the distribution. This penalty is levied in addition to any regular income taxes due on the withdrawal. Therefore, an early withdrawal can result in a significant reduction of the total amount received.