Is my 403(b) account owned by me or by the institution?

By Denise Appleby AAA
A:

You are the owner of your 403(b). The financial institution just holds the assets on your behalf and facilitates your transactions.

For the assets they hold on your behalf, financial institutions generally provide certain protection against their own failure. If your account is held at a brokerage firm, your assets are protected under the Securities Investor Protection Corporation (SIPC). If your assets are held at a bank, your assets are protected under the Federal Deposit Insurance Corporation (FDIC). Protection is generally offered up to certain amounts. You should check with your financial institution regarding the amount of protection it provides. Most financial institutions offer brochures on the topic.

You may withdraw the assets from your 403(b) account only when you meet one of a list of requirements:

  • You become disabled.
  • You separate from service or from employment.
  • Your beneficiaries claim the amount upon your death.
  • You reach age 59.5.

Some 403(b) plans also allow you to withdraw amounts without meeting any of the above requirements if you experience certain financial hardships. Your employer or the plan provider should be able to tell you the requirements for receiving a hardship distribution.

Assets that you remove from your 403(b) account that are not rolled over to an eligible retirement plan may no longer benefit from tax-deferred earnings. Also, assets that are no longer in the 403(b) account (that are not rolled over or transferred to another eligible retirement plan) are not offered protection from bankruptcy proceedings, attachment, or other legal process. 403(b) plans are generally offered this protection.

For more on distributing amounts from 403(b) plans, see our 403(b) Plans Tutorial.

This question was answered by Denise Appleby
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