401k / 403b Withdrawal

[Karen Kasjaniuk]

I have been told that I cannot withdraw from my 403b plan unless I take a loan or am 59.5 years old (which I am not), even if I am willing to take the IRS penalty.  I was told, however, that if I were to take a loan and default, it would trigger a 1099, treating it as ordinary income, meaning pay the penalty plus related taxes.  When I questioned if that could affect my credit in any way, he said no because it was a loan to myself.  Has anyone considered or done this?  Are there any trip wires that I need to be cautious of ... other than "you have to consider the lost earnings if you withdraw your money, etc, etc."  I get all of that and I haven't made a decision, just getting all of the facts to determine if this is a viable option for me.