Or if instead of buying a house, I want to buy a retirement annuity, would I have to pay tax on the sum of the 403b and then pay tax each year on the money from the annuity?
2007-10-15 09:16:52 · 6 answers · asked by Corinnique 3 in Business & Finance ➔ Taxes ➔ United States
I assume that your 403b contributions were made tax-deferred.
You cannot avoid income tax on the 403b distributions by buying a house.
You can purchase an annuity with your 403b money. Your trustee can set this up, in some cases (like TIAA-CREF) at no cost. You will not pay taxes on the purchase price of the annuity, since it will stay inside the 403b.
If someone is advising you to cash out your 403b and then purchase an annuity, find another advisor because this is very much not to your benefit. If you did this, you would pay a huge amount of tax on the purchase price of the annuity, and then pay taxes on any earnings, plus pay big annuity charges.
When you take out your annuity payments, the entire amount of the payments will be taxable. This is because neither your contributions nor the earnings were ever taxed.
2007-10-15 11:25:10 · answer #1 · answered by ninasgramma 7 · 0⤊ 0⤋
if you retire and draw on your 403(b) before the age of 59 1/2 any money you take out will be taxed as ordinary income as well as a 10% excise tax. if you are 59 1/2 or older you will still be taxed but without the additional excise tax.
if you buy a retirement annuity (which isn't always the greatest of ideas for several reasons) you will be doing a transfer of sorts and will not be taxed until you start to receive your monthly payments. then you will be taxed as ordinary income.
2007-10-15 09:27:29 · answer #2 · answered by John S 4 · 0⤊ 0⤋
Here's IRS pub 571 for these kinds of annuity plans:
http://www.irs.gov/pub/irs-pdf/p571.pdf
Distributions are explained on page 13. So far, from what I've read, it looks like a "no". When you reach 59 1/2, you can take money out, and everything you take out is taxable as ordinary income.
2007-10-15 09:23:38 · answer #3 · answered by Anonymous · 2⤊ 0⤋
It wasn't taxed when it went in, or on the growth, so it's taxed whan it comes out.
If you use it to buy an annuity, then you won't be taxed on the amount of the annuity payouts that represent what you put in.
2007-10-15 09:57:24 · answer #4 · answered by Judy 7 · 1⤊ 0⤋
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2015-02-04 21:43:09 · answer #5 · answered by Angelico 1 · 0⤊ 0⤋
most likely going to be taxable no matter what you do with it
2007-10-15 09:20:11 · answer #6 · answered by Anonymous · 1⤊ 0⤋