Author Topic: Loan from 403b?  (Read 1303 times)

Gyosho

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Loan from 403b?
« on: August 26, 2015, 10:42:06 AM »
The recent stock market correction has made me want to max out my 403b contributions, but I'm afraid that I might need cash on hand for any unseen emergencies (broken water pipes, etc.). Would it be more advantageous for me to max out my 403b contributions and then take a loan from my 403b in case of an emergency, or should I keep my contributions at their current level and continue to save some short-term cash?

I am currently in the 25% tax bracket.

Thanks.

seattlecyclone

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Re: Loan from 403b?
« Reply #1 on: August 26, 2015, 11:10:56 AM »
Loans from workplace retirement plans can be risky because the entire sum will become due immediately if you leave your job; if you fail to repay it, any remainder counts as an early distribution subject to income tax and the 10% early withdrawal penalty.

That said, if you think needing to access this money is relatively unlikely, your better bet is probably to max out the retirement account, take a loan from it if you really need to, and work on establishing a suitable emergency fund outside your 403(b) within a couple of years.