Is there a penalty for early withdrawal from 403b for first time down payment on house?

Answer 1

Yes, this exemption from the penalty only applies to IRA accounts.

Answer 2

First, your 401(k) plan is not required to ALLOW withdraws of ANY kind while you remain employed by the company. Second, a withdraw to purchase a home, is NOT a hardship withdraw, even if your plan allows it. You can ROLL the 401(k) into an IRA without penalty if you are no longer employed by that company. You CAN'T withdraw the money without penalty until you are 59 1/2, unless you qualify for a specific exception in the tax code. The 10% penalty has NOTHING to do with interest. While I don't recommend taking money from a retirement plan for a down payment, you NEED to discuss this with a PROFESSIONAL before you THINK about a withdraw. OUR advice is no more reliable than they conflicting advice you already have.

Answer 3

Yes, 403(b) and 401(k) plans do not have the first-time home buyer exclusion from the early withdrawl penalty.

A different approach to this is to inquire about a loan. Most 403(b) plans are written with the ability to borrow from the plan. This allows you access to the cash without paying taxes or penalties on the amount.

Two caveats to the approach. First, it is considered a loan with a repayment plan, so that may impact a mortgage if you are persuing one. Second, if you leave the employment of the non-profit, you will be on a reduced time-table to repay the entire amount. The time table is determined by the plan documents, but is often within a year. If you fail to repay it all in time, it becomes a distribution subject to penalty.

Answer 4

You may be able to get a hardship withdrawal for a down payment. You still have to pay the 10 percent penalty and taxes.