You are correct - there is no taxable event in a 401k or 403b until the funds are withdrawn. When a distribution is taken, you will receive a 1099-R at tax time, and generally if you are withdrawing the funds, the plan administrator will give you an opportunity to direct how much tax you would like to be withheld when you take the money out.
These retirement accounts are funded with pre-tax contributions (usually directly withheld via payroll deduction) and you will not pay any taxes on the activity in this type of account until you withdraw the money from the account (whether at retirement as it's intended, or early for some other reason.)
Transactions within the account (buying and selling the underlying funds within the retirement account) are not taxable events. Additionally, taking a loan out of your 401k does not generate a taxable event, unless you leave your employer before the loan has been fully repaid.
Clarissa
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