Looking to pull money from my 403 B. To fund a new business I am starting.

[eric-wendell-joh]

Looking to pull money from my 403 B. To fund a new business I am starting. I get hit with a 10% tax penalty since i am not 59.5 and then that amount received is taxable at roughly 35%(whatever my final tax rate is with normal salary plus the withdrawal). If i roll that money over to a business how does this effect the taxable income. The new business will probably show a loss the first year. I am a part owner (33%) of the business i am investing in. 

[SweetieJean]

Are you still working at the place where you have the 403(b)?

[Critter]

What you use the money for will have no effect on how the 403B is taxed ... there is no way to avoid it EVEN IF the employer will allow the distribution.  So expect to kiss 35% - 45% away in federal, state and penalties.

[SweetieJean]

unless you are able to take it as a loan

[Opus 17]

Withdrawals from a 403b are taxed as ordinary income. If you are under 59-1/2, there is a 10% penalty for early withdrawal.  There are no exceptions or tricks to postpone the tax by doing something else, such as investing in a new business.

If you are still employed with the plan sponsor, you probably can't withdraw money anyway, but you could take a loan.  Loans from a retirement plan are not taxable unless you default on the payments.

If you have separated from this employer, you have the option of rolling the money over into an IRA instead of leaving it in the 403b.  A self-directed IRA might have broader investment options than the 403b.

It might be possible that you could put the money in an IRA and then invest the IRA money in the new business.  This is an advanced tax move that has grave legal and financial risks if you make a misstep, and you should not go near the idea without an expert investment advisor, attorney and CPA helping you.