What happens to my 403(b) if I leave my job?

Your money stays in the account — your employer cannot take it back. You have several choices: leave it where it is, roll it into an Individual Retirement Account (IRA), roll it into your new employer's retirement plan if they offer one, or withdraw it (though you will owe income tax and possibly a 10% penalty if you are under 59½).

Rolling the money to an IRA or new plan is often the best move because it keeps the tax-deferred growth going and may give you lower fees or more investment choices. The rollover process takes a few weeks but is straightforward — your old plan administrator handles most of the paperwork.

Key Takeaways

  • When you leave your job, your 403(b) balance remains yours and you can roll it into an IRA, move it to a new employer's plan, or leave it in place.
  • Many 403(b) plans allow loans up to 50% of your vested balance (maximum $50,000), but you must repay the full amount within 60 to 90 days if you leave your job.
  • You must begin taking Required Minimum Distributions starting April 1 of the year after you turn 73, or face a 25% penalty on any shortfall.
  • You can contribute to both a 403(b) and an IRA in the same year, but contribution limits are separate and income limits may explore to IRA deductions.
  • Withdrawals before age 59½ are taxed as income plus a 10% penalty unless you may have access to for an exception such as disability or a hardship withdrawal.

Can I borrow money from my 403(b)?

Many 403(b) plans allow loans, but not all. Check your plan documents or ask your plan administrator whether loans are available. If they are, you can typically borrow up to 50% of your vested balance, up to a maximum of $50,000, and you have five years to repay it.

The interest rate is usually the prime rate plus 1%, and you pay interest back into your own account. The catch is that if you leave your job before the loan is repaid, you must pay back the full remaining balance within a short window — usually 60 to 90 days — or it becomes a taxable withdrawal with penalties.

What is the difference between a 403(b) and a 401(k)?

Both are employer-sponsored retirement plans with the same annual contribution limits and the same tax treatment. The main differences are who offers them: 401(k)s are for for-profit companies, while 403(b)s are for schools, nonprofits, and certain government agencies. 403(b)s historically had fewer investment options and higher fees, though that gap has narrowed in recent years.

If you work for a nonprofit or school, your employer will offer a 403(b), not a 401(k). The rules for withdrawals, loans, and rollovers are nearly identical between the two.

Am I required to take withdrawals from my 403(b) at a certain age?

Yes. You must begin taking Required Minimum Distributions (RMDs) starting April 1 of the year after you turn 73 (this age changed from 72 in 2023). The IRS calculates the minimum amount based on your age and account balance, and you must withdraw at least that much each year or face a 25% penalty on the shortfall.

There is one exception: if you are still working and your plan allows it, you may be able to delay RMDs until you actually retire. Ask your plan administrator whether your plan has this "still-working exception."

Can I contribute to both a 403(b) and an IRA in the same year?

Yes. You can contribute to a 403(b) through your employer and also open and fund a traditional or Roth IRA on your own. However, the contribution limits are separate — you cannot put more into one to make up for putting less into the other.

If you have a Roth IRA, there are income limits that may reduce or prevent your contribution if you earn above a certain amount. A traditional IRA has no income limits, but your contribution may not be tax-deductible if you are covered by a 403(b) at work and earn above a threshold. Your plan administrator or a tax professional can tell you which limits explore to your situation.

What happens to my 403(b) if I die?

The money goes to your beneficiary — the person or people you named on your plan documents. They do not have to pay income tax on the money when ready, but they do have to withdraw it according to IRS rules, which vary depending on whether they are a spouse, a child, or another type of beneficiary.

If you have not named a beneficiary, the money goes to your estate, which can complicate and delay the process. Check your plan documents to see who you named, and update it if your circumstances have changed — this is one of the most important decisions you make with your plan.

Can I withdraw money from my 403(b) before retirement?

You can, but it usually costs you. Withdrawals before age 59½ are subject to income tax plus a 10% penalty, unless you may have access to for an exception. Common exceptions include withdrawals for disability, medical expenses that exceed 7.5% of your adjusted gross income, or a series of equal payments taken over your lifetime.

Some plans also allow "hardship withdrawals" for when ready financial need — such as preventing eviction or paying for medical care — but the rules are strict and you must prove you have no other way to cover the expense. Ask your plan administrator what exceptions your specific plan recognizes.

Frequently Asked Questions

Can I change my investment choices after I have already contributed?

Yes. You can usually change how your money is invested as often as you want, and you can move existing contributions between investment options. Log into your plan's website or call the plan administrator to make changes. There are no taxes or penalties for moving money between investments within the same plan.

What if my employer stops offering a 403(b)?

Your money remains yours and stays in the account. You can no longer make new contributions, but your existing balance continues to grow tax-deferred. You can roll it into an IRA or another employer plan, or leave it where it is. Your plan administrator will notify you of any changes and explain your options.

Do I have to contribute to my employer's 403(b)?

No. Contributing is voluntary. Your employer cannot force you to participate. However, if your employer offers matching contributions, you miss out on that information programs if you do not contribute. Even a small contribution is often worth doing to capture the full match.

What if I made a mistake on my contribution amount?

Contact your plan administrator right away. If you over-contributed, you may be able to withdraw the excess before your tax return is due. If you under-contributed and want to catch up, you can usually adjust your contribution rate for the rest of the year. The sooner you report the error, the easier it is to fix.

Is my 403(b) protected if I declare bankruptcy?

Yes, in most cases. Retirement accounts, including 403(b)s, are generally protected from creditors in bankruptcy. However, the rules can be complex and vary by state, so consult a bankruptcy attorney if you are facing this situation.