|
If you have a 403b retirement plan, you should know that some administrators of the plan allow the investor to take loans against the monies present in the 403b account. However, if you are contemplating taking a loan against your 403b plan, make sure you repay the loan or else you have to pay some serious penalty charges on the 403b loan default.
You should be aware that most 403b loans have to be repaid within 5 years. The loan term can extend to 30 years only if you use the loan amount to pay for a new home. If you default on the loan amount, the unpaid balance of the loan is treated as early withdrawal and you will have to pay federal and state taxes along with a 10 percent early-withdrawal penalty.
In addition, the IRS has very strict restrictions on loan repayments. Even if you miss out on a single installment, it will be viewed as a 403b loan default and the loan cannot be reinstated under any circumstances.
Even if you take out a small loan on your 403b monies, you should not think of defaulting. The loan amount is outside your annuities and the loan will continue accumulating interest until you decide to either withdraw the money from your 403b account or the loan balance equals your annuity. Either way, you will have to pay the loan amount and this will drastically reduce your retirement fund or eat away your retirement savings.
More Articles :
|
|