What happens if my 403b loan defaults?

Submitted by Cubby8 t3_127o2l7 in personalfinance

I have around $5000 in a tax sheltered annuity plan through national life group. I am still with the same school district, but have stopped contributing to the plan, and instead contribute to an ira. I would like to get the cash out if I can somehow.

My question is, what happens if I take a loan on the plan and just don’t repay it? Outside of the 10% penalty, and that money being taxed as income is there anything else I’m missing? Or any other consequences I haven’t seen?

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Werewolfdad t1_jeeyvdf wrote

You generally can’t just not pay it as the payments come from payroll

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Cubby8 OP t1_jef6fxo wrote

So if I don’t pay, the plan administrator would essentially garnish my wages to pay it back? I just never read anything about that when I was researching. Thanks.

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Werewolfdad t1_jef6t9y wrote

You don’t have an option to not pay. It just comes out of your paycheck.

You give them authorization to deduct that as part of the approval process.

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Cubby8 OP t1_jef9nuz wrote

Gotcha. That makes sense. I’ve never done anything like that and was curious. I just hate the fact that I was contributing to something with no growth potential and that money is just sitting there.

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Werewolfdad t1_jefaxol wrote

Your plan doesn’t have an option for non-annuity based investments?

Check out 403bwise.org for potential options

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Cubby8 OP t1_jefhrc5 wrote

Ah thanks! I didn’t realize my district had other options.

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