| Retirement plan withdrawals and gifts….read on:
READER QUESTION:
Is there a way I can take money out of my 403(b) for a gift to my son without me being taxed as income?
MY RESPONSE:
Let me begin by saying I know a lot about how retirement plans work (especially their interplay with trusts), but I am far from a guru on the subject. What I do know is that the answer is normally no! When you withdraw money from any retirement plan (other than a Roth IRA), you are subject to the income tax.
However, one strategy that may be helpful to avoid the income tax is to BORROW from your 403(b). Check with your employer if your plan allows borrowing first, but if allowed, you can generally borrow the lesser of $50,000 or 50% of your vested account balance. Unfortunately, as with all “loans”, you have to pay yourself back with interest (usually over a 5-year period), and I would think from future after-tax payroll deductions. If you pay it back over time, there will be no penalty or interest charges.
This is all I can think of. I’m skeptical as to whether this would be a good idea, but in a pinch, it is an option. |
