Author Topic: What to do with 403(b) savings?  (Read 1080 times)

AntonioINMD

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What to do with 403(b) savings?
« on: July 05, 2016, 01:04:46 PM »
I wanted to pose a question to this forum to get some opinions other than my own.  My wife has a 403(b) through her employer with a balance just over $32k.  She was working full-time, but once we started having kids she cut back her hours significantly.  She is at the point where she is working maybe 1 shift a month (she is an RN).  With her working so little and contributing so little to her 403, I was considering an early withdrawal on her 403 and using those funds to eliminate debt (student loans)?  The balance would be more than enough to pay off all our student loan debt (Assuming 10% early withdrawal and 25% tax rate.).  This way we wouldn’t have to touch the cash we currently have in savings/invested.  Neither of us see her going back to work full-time or even half-time anytime soon.  Paying off those loans would free up ~$300/month.

Thanks for you input

Antonio

seattlecyclone

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Re: What to do with 403(b) savings?
« Reply #1 on: July 05, 2016, 01:31:39 PM »
First off, if she's still on the payroll at all she probably can't withdraw from the 403(b).

Secondly, if you have taxable investments why not use those first? Retirement accounts are a great way to shelter your wealth from taxes for the long term. Don't dip into them and pay early withdrawal penalties when you have another alternative.

maizeman

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Re: What to do with 403(b) savings?
« Reply #2 on: July 05, 2016, 01:37:31 PM »
I agree. Paying off the debt to increase your cash flow may make sense, particularly if your household income has dropped a lot now that your wife is spending more of her time on raising kids instead of working, but why would you pay the extra penalty to use the 403b money (plus increasing your taxable income for the year) instead of just pulling from taxable accounts?

AntonioINMD

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Re: What to do with 403(b) savings?
« Reply #3 on: July 05, 2016, 01:49:51 PM »
You both brought up good points, the reason I came here to post.  I didn't think about the impact on increasing taxable income for the year or just using the taxable investments.  I wasn't considering all the facets of my own question.  I'll save myself the 30-35% penalty/tax by just using the other investments and cash. 

Thanks guys!