4 Replies Latest reply on Aug 15, 2013 3:29 PM by Francisca

    Taking 403(b) distributions While Working

    Francisca
      I plan to work full-time until I am 63 and will do a phase-out until I am 66.  I turn 59 1/2 this coming October and while I don't need the monies to live on, I am wondering if I should begin to take distributions from my 403(b) and invest these monies.  My thinking is that it would be better to pay taxes on these funds now so they can grow tax-free.
        • Re: Taking 403(b) distributions While Working
          JerryD
          Ever consider using some of the current job income and/or savings to save on future taxes by doing IRA to Roth conversions for those 5-6 years. You permanently shelter those funds from taxes and it provides an excellent no-tax emergency fund and it can ride forever even for your beneficiaries.
           
          Just don't do conversions so large that they are too expensive in those years. In  those years where you cut back on work the Roth conversions should be easier from the tax perspective because if smaller incomes. 
          • Re: Taking 403(b) distributions While Working
            pal007
            Francisca,
             
            Any money you take out of 403b is going to increase your tax liability.
            There is no advantage taking a distribution, if don't need it.
            Leave it as is and let it grow tax differed. Follow JerryD's advice if your financial situation permits.
            • Re: Taking 403(b) distributions While Working
              smaneck
              Francisca said...
              I plan to work full-time until I am 63 and will do a phase-out until I am 66.  I turn 59 1/2 this coming October and while I don't need the monies to live on, I am wondering if I should begin to take distributions from my 403(b) and invest these monies.  My thinking is that it would be better to pay taxes on these funds now so they can grow tax-free.

              Are you planning to move them over into a Roth IRA? Otherwise how would they grow tax free? If I were you I might roll some of the money over into a Roth IRA during your 'phase out' period when you aren't making that much, but you don't want to do it when your income is higher than it will be in retirement.  
                • Re: Taking 403(b) distributions While Working
                  Francisca
                  Yes, was planning to put into a Traditional IRA and then to transfer to a Roth so the earnings would grow tax free.  Since I'm already maxing out my and my husband's Roth each year, this is the only way to get other monies into it.  We are currently able to save another $4,000/mo. so I was thinking that I could spend some of those funds on current taxes, but the idea of waiting until my phased retirement is a good one.