How can i withdraw from a 403 (b) and not get the 10% tax penalty?

Question

My mom is trying to get the money out of her 403 (b) plan but we don't want to pay the 10% penalty due to the fact that she'll have to pay federal taxes at the end of the year which don't take into account the 10%. I know this is a bad idea and we should wait and and try to find money from another source but that's not the case so just answer my question based on the information i give you. I know she can't take it directly from the employer's plan without the penatly but i do know she can roll it over to possibly a traditional or a rollover IRA and not get the penalty. But after she rolls it over she'll want to get it out and i know there's a way to withdraw from an traditional or roll over IRA without getting that 10% early withdrawal penalty. Any takers?

Also, she has already retired from the job.

Answer 1

Normally an employers plan does not allow distributions while you are working. You would need to check the plan document. Given this I would suggest that she look at the loan provisions of the plan. Most plans allow you to borrow from your account and pay back the amount borrowed over a five year period.
The only way to avoid the 10% penalty on IRA distributions prior to age 59 and one-half is to take an annuity distribution over her life expectancy which normally won't get much of a distribution unless there are significant dollars in the account.

Answer 2

a 403b can only be "borrowed" against if you have a life changing event: Need the $ to pay on the mortgage before it forecloses, Medical expenses, ect.
Then you will have to provide the company with documentation of these events. Plus you will have to pay the amount back that year or get the penalty.