Taking Money Out — Rules, Penalties, and Timing

Last Updated: July 30, 2026

Understanding when and how you can access your 403(b) is essential planning knowledge for anyone in their 50s and 60s. The rules around withdrawals will directly affect your retirement income strategy — and getting the timing right can save you a meaningful amount in taxes and penalties.

When You Can Withdraw Without Penalty

You can take distributions from your 403(b) without the 10% early withdrawal penalty in any of these situations:

• You reach age 59½

• You separate from your employer — whether you retire, resign, or are laid off — and you are 55 or older in that calendar year (see the Rule of 55 section below)

• You become permanently disabled

• You qualify for a hardship distribution under your plan's terms

If you pass away, your named beneficiaries can access the funds in your account without the 10% penalty as well.

Even when you withdraw penalty-free, the amount is still taxed as ordinary income in the year you receive it (unless it comes from a Roth 403(b) account).

The Age 55 Rule

If you separate from your employer in or after the year you turn 55, you may be able to take withdrawals from that employer's 403(b) without the 10% penalty — even before you turn 59½. This is known as the Rule of 55, and it applies whether you retire, resign, or are laid off.

If you work in a qualifying public safety role, such as law enforcement, firefighting, emergency medical services, or corrections, the threshold drops to age 50. Qualified public safety employees can take penalty-free withdrawals from a governmental plan after separating from service in the year they turn 50, or after completing 25 years of service under the plan, whichever comes first.

Two things to keep in mind for both rules: not all plans allow distributions immediately after separation, so check with your plan contact to confirm. And if you plan to use either rule, do not roll the account into an IRA first — the exception applies only while the money remains in the 403(b).¹

Required Minimum Distributions (RMDs)

The IRS requires you to start withdrawing a minimum amount from your 403(b) each year once you reach a certain age. These are called Required Minimum Distributions, or RMDs. When that age begins depends on when you were born:

• Born between 1951 and 1959 — RMDs begin at age 73

• Born in 1960 or later — RMDs begin at age 75

You do not get to choose whether to take them. If you miss an RMD or withdraw less than the required amount, the IRS penalty is significant.²

RMD amounts are calculated each year based on your account balance and IRS life expectancy tables. Many plan administrators will walk you through this and send an annual reminder, but the responsibility is ultimately yours. If you are getting close to your RMD age, this is a good planning step to put on your radar now.

One thing worth knowing: if you are still working and contributing to your current employer's 403(b), you may be able to delay RMDs from that specific account until you retire. Not all plans allow this, so check with your plan contact to confirm. This does not apply to 403(b) accounts from previous employers.

Early Withdrawals Before 59½

If you take money out before 59½ without a qualifying exception, you owe income taxes on the full amount plus a 10% penalty. Before going that route, check whether you qualify for the Rule of 55 or another exception listed above — and consider other options such as a loan from the plan or a hardship provision.²

SOURCES

1. "Retirement Topics — Exceptions to Tax on Early Distributions." Internal Revenue Service. irs.gov/taxtopics/tc558. Accessed July 2026.
   
   
2. "Retirement Plans FAQs Regarding 403(b) Tax-Sheltered Annuity Plans." Internal Revenue Service. irs.gov/retirement-plans/retirement-plans-faqs-regarding-403b-tax-sheltered-annuity-plans. Accessed July 2026.