How to Borrow From an Inactive 403(b)
A 403(b) retirement account is like a 401(k) in many respects, except that it's for employees of nonprofit organizations such as schools, churches, or the civil government. Employees agree to have a certain amount of pretax dollars withdrawn from their paychecks to invest in the 403(b), which grows tax-free until withdrawal. The employer also usually contributes matching funds to the 403(b). Though experts advise that it's not a good idea, employees often ask about the possibility of borrowing money from a 403(b). Plans vary from employer to employer. Some plans allow active employees to borrow against their 403(b) accounts under certain circumstances, but most do not permit this for employees who no longer work there or have stopped contributing to the inactive account. However, there are still several ways to access the money in an inactive 403(b).
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Instructions
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Contact your plan administrator and ask if loans are permitted against an inactive 403(b) account under your retirement plan. Every plan is different, but even if your plan allows for such a loan, bear in mind that if you are not yet 59 1/2, in order to avoid early distribution penalties, you cannot borrow more than $50,000 total from this employer, must repay the loan in five years unless borrowing it to buy a principal residence, must make at least quarterly payments and must pay a "reasonable" rate of interest on the loan.
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Roll the inactive 403(b) account over into your current, active retirement account, where you have a better chance of being able to borrow against it. You can usually do this without triggering a taxable distribution, though note that if you roll it into an individual retirement arrangement, you can't borrow against it.
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Cash out of the inactive 403(b). This is the most expensive of your options, though it may be the only one open to you. Cashing the 403(b) out means that you are immediately liable for the taxes due on the investment. If you are under 59 1/2 years old, you will also incur a penalty for early withdrawal.
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Tips & Warnings
Most investment advisers warn that you should only borrow against your retirement funds if it's a true emergency, such as a financial or health crisis, and even then only when there are no other options.
References
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