Expert: Allen - 1/10/2004

Question
Dear Allen,
I work in a university and participate in their 403b pension plan. I have been thinking about early retirement before the age of 59 and a half which is when I can start withdrawing money from my pension plan without penalty. If I retire early, is there anyway I can withdraw money from  my pension plan and avoid the 10% penalty  and just pay ordinary income tax on the amount I withdraw.
Thanks,
Omid


Answer
I do not believe there is anyway to avoid the penalty if you withdraw directly from the 403b. However, if you can have the money transferred to an IRA, you can avoid the penalty by taking uniform distributions over your theoretical lifetime or the theoretical joint lifetime of you and your spouse. The methodology for calculating the distribution is outlined in IRS regulations. The payments must be made until the later of age 59 1/2 or 5 years.