Early Withdrawal Of 403b
August 21st, 2006
Question: Loan Repayment Terms Borrowed from 403B?
Okay, I know this was a no-no, but the damage is already done. So please no responses telling me about the damages of doing this. My question is now that it’s done if I am late making the payments I risk being thrown into default status. What does this mean in layman’s terms? Is there ever a “grace period”? I found the following on the website from my retirement acct. regarding late loan repayments. (I know I’d be subject to the 10% penalty bc I am only 31) Thanks.
***The outstanding loan balance will be considered a taxable distribution and in default. It will be subject to ordinary income taxes, and possibly to a 10% Early Withdrawal Penalty if you are younger than age 59 1/2.***
Answer: layman terms you tax bill just went up for this year since the loan will be considered income — strongly suggest you figure the worst case tax bill you face and start figuring out where you can get this money before apr 15th!!!!
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