What is the penalty for early withdrawals?
There is a 10% penalty for early withdrawal of qualified retirement funds prior to age 59 ½ and all withdrawals are taxed as ordinary income, unless the distributions is rolled-over to another qualified retirement plan. Other exceptions, if the annuitant is totally disabled, separates form service (after age 55), or dies. Also, the salary reduction amounts (but not the earnings) are available for “financial hardship” e.g., an immediate and heavy financial need which cannot be met with other assets. END RESULT: 1. The employee avoids current income taxation on deferred amount (except it is included in the Social Security base.). 2. The earnings on the accumulating funds are not taxed until they are distributed. 3. 403b’s offer financial security and investment growth. 4. 403b Income doesn t reduce other Retirement Benefits. 5. 403b’s offer flexible payment options. 6. Earnings accumulate tax deferred in a 403b. When it comes to 403b’s, other annuities or investments in mutual funds, The
