Contributions to 401(k) plans and 403(b) plans have the same effect on your taxes as a contribution to a traditional IRA.

If you qualify for both a Roth IRA and a 403(b), which should you choose? For many, the answer is “both” – you can absolutely contribute to both a 403(b) and a Roth IRA at the same time. As with a 401(k), an employer may choose to match some of their employees’ contributions to a 403(b).

But the 403(b) contribution limit is separate from the limit for a traditional IRA or Roth IRA. That means you’re allowed to contribute the maximum to a 403(b), and contribute the maximum to a traditional or Roth IRA in the same year.

A 403(b) plan is a retirement account available only to some ministers, employees of qualifying tax-exempt organizations and employees of public schools. Most contributions to 403(b) plans are exempt from income taxes.

No. The transaction for moving funds from one 403(b) plan to another, that is known as a “plan-to-plan transfer,” does NOT involve a distribution of plan assets. Only distributions are reportable on a 1099-R, and thus, a 403(b) plan-to-plan transfer is NOT reportable on a 1099-R.

Aside from ordinary income taxes due on the money you receive, you must also pay a 10 percent early withdrawal penalty. If your 403(b) contains a sizable balance, these taxes and penalties might significantly reduce how much money you actually receive when you cash out.

Upon retirement, you can annuitize all or part of your 403(b), which will provide you with a guaranteed income stream for life and can provide a designated beneficiary with funds after your death.

Report the withholding, if any, from your withdrawal on line 62 of Form 1040. You can find this amount in box 4 of your Form 1099-R. This decreases your taxes due or increases your refund.

Hardship distributions A hardship distribution is a withdrawal from a participant’s elective deferral account made because of an immediate and heavy financial need, and limited to the amount necessary to satisfy that financial need. The money is taxed to the participant and is not paid back to the borrower’s account.

If you’re over age 55 and you’ve lost your job, whether you were laid off, fired, or quit, you can also pull money out of your 401(k) or 403(b) plan from your current employer without penalty.

What is financial hardship? Financial hardship typically refers to a situation in which a person cannot keep up with debt payments and bills or if the amount you need to pay each month is more than the amount you earn, due to a circumstance beyond your control.