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Life happens. Every now and again, life throws us a curve ball and puts us in a financial bind. Although there are features established by the IRS that may permit you to access your funds before retirement, there are requirements that may discourage or prevent you from doing so. I’ll share a quick story before I get into it.

When I was in the 5th grade, my mom took our family, along with two other families, on the most epic 3-week summer vacation. Our family of four flew from El Paso to Orlando and spent a week at Disney World! From there, we flew to Boston and trekked around the east coast in a 15-passenger van also visiting New York, New Jersey, and Washington DC. To this day, we reminisce about that trip and I’m incredibly grateful to have had that opportunity as a kid.

Here’s the kicker. We couldn’t exactly afford that vacation. That trip was only possible for our family because my mom withdrew money from her 401(k). My parents worked hard and so do you. And although I have fond memories of that trip, I would still like to do things differently given what I know now. I believe that you can have anything you want – you just need to plan for it. My hope is to educate my clients and community to take control of their finances and plan for their future.



I caution my clients from thinking about their retirement accounts as a bank account — they are not to be confused. When possible, look to access funds from any cash sources before tapping your retirement accounts.  By leaving your retirement accounts intact, you will continue to benefit from tax-deferred growth and benefit from compound interest over time. Tapping your retirement accounts early, on the other hand, can seriously hamper your ability to build savings.

Due to the limitations on accessing your retirement accounts, it is recommended that you have 3-6 months’ worth of expenses in an emergency fund. That said, if you’re just starting out, aim for $1,000 emergency fund first. Then increase it over time. Should an emergency occur, this is where you should turn first — your emergency savings account.

If your emergency fund has been exhausted, you may be able to take a loan or early distribution from your retirement account. I’ll underscore that it is generally not advisable to do so. That said, I’ve highlighted some things to keep in mind for each. This information is not exhaustive, and policies vary by plan.



Generally, taking a loan rather than an early withdrawal may be more prudent. Although you pay interest on a loan, it prevents you from taking an early withdrawal penalty.


Although plans differ, you are generally able to borrow a minimum of $1,000 up to the smaller of 50% of your vested balance or $50,000. That means at minimum, your account balance needs to have a balance of at least $2,000 plus any loan initiation charges before you can make a request.


  • By taking a loan, you lose out on the potential returns your account would have earned had the money remained in your 403(b) or 457. If you took a loan in 2009, for example, you would have missed much of the greatest bull market in history.
  • There are often loan origination fees as well as loan maintenance fees for the duration of the loan term. Unlike your contributions, loan payments must be made with after-tax dollars.
  • Your loan will be subject to interest, however, the interest you pay goes back into your account.


  • You have up to 5 years to repay the loan (I encourage my clients to consider a shorter term when possible) but are required to make monthly or quarterly payments. If the loan will be used for the purchase of a primary residence, it may be repaid within a maximum of 30 years.
  • In order to pay off your loan early, generally it must be paid in full.
  • Should you decide to leave your employer, you may be required to pay the balance of your loan immediately.
  • If you do not meet your loan commitments, the IRS treats it as a distribution, and you may owe a 10% tax penalty. Defaulting on your loan will disqualify you from taking any loans in the future.



If you withdraw funds from a retirement plan, 20% Federal income tax withholding is required unless you are making a withdrawal to satisfy your Required Minimum Distribution (RMD). If you have a Roth account, your earnings will be subject to taxes. Withdrawals are taxed as ordinary income in the year received.


Generally, you can access your 403(b) retirement account without penalty if you are age 59 1/2. If you leave your district at age 55 or older, the 10% early withdrawal penalty would not apply to you. If you try to access your funds earlier, you will be subject to a 10% early withdrawal penalty, need to provide documentation and must meet qualifications stipulated by the IRS:

  • Medical care expenses for the employee, the employee’s spouse, dependents or beneficiary.
  • Costs directly related to the purchase of an employee’s principal residence (excluding mortgage payments).
  • Tuition, related educational fees and room and board expenses for the next 12 months of postsecondary education for the employee or the employee’s spouse, children, dependents or beneficiary.
  • Payments necessary to prevent the eviction of the employee from the employee’s principal residence or foreclosure on the mortgage on that residence.
  • Funeral expenses for the employee, the employee’s spouse, children, dependents, or beneficiary.
  • Certain expenses to repair damage to the employee’s principal residence.


Once you’ve severed employment from the employer who holds your 457 plan, you are eligible to take distributions. Distributions are not subject to the 10% early withdrawal penalty. To access your funds before you sever employment, you need to provide documentation and must meet qualifications stipulated by the IRS:

  • an illness or accident of the participant, the participant’s beneficiary, or the participant’s or beneficiary’s spouse or dependents;
  • property loss caused by casualty (for example, damage from a natural disaster not covered by homeowner’s insurance) of the participant or beneficiary;
  • funeral expenses of the participant’s spouse or dependent; and
  • other similar extraordinary and unforeseeable circumstances resulting from events beyond the control of the participant or his or her beneficiary (for example, imminent foreclosure or eviction from a primary residence, or to pay for medical expenses or prescription drug medication).

Regardless of the reason you are reading this blog post, if you are ready to think differently about your money, I encourage you to read my blog: Enough! I am ready to take control of my personal finances.


I know that you’re busy and it’s not always easy to make sense of your personal finances. There is no substitute for having a plan. Whether you’re just starting out or interested in learning more, I am happy to be a resource along the way.

Schedule a Meeting: In person or virtual

Jesse is a graduate of the University of Notre Dame and earned his Master’s in Education from Harvard. In his education career, he served as a teacher, counselor and Director of Alumni for YES Prep Public Schools. He is a member of the Teacher Retirement System of Texas (TRS) and takes pride in helping fellow educators better understand their pension and plan for their future. Learn more about Jesse.