Equity for a 403?

If I re mortgage my home which has a mortgage balance of $75,000, it's now assessed at $230,000, and I refinance for $180,000, can I take $150,000 out to open a 403 IRA? Are there any tax liabilities? The current mortgage rate is an arm due to reset in two years. I'm expecting rates to come down near 5%. This is a what if question for a friend. Any thoughts.

Is your friend an employee of a Non-Profit organization, a School district or is he incorporated as one himself or is he a Minister? A 403(B) plan, also known as a "Tax Sheltered Annuity" is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations, and certain ministers. In order to use a a 403(B), he would have to qualify as one of those. Even if he did work for such an organization, there is no way he could take the proceeds from a mortgage re-finance and add it to his retirement account.

IRS Publication 571 talks about these types of plans.

Here is an excerpt from Pub. 571 stating who can set one up;


I'll assume you and your friend are aware of the inherent risks involved in using borrowed money to invest with, so I won't belabor that point.

If he is looking for some sort of investment account that would provide Tax Deferral on that large of a sum as an initial deposit, to my knowledge there is none. He could open a Traditional IRA or a Roth but the contribution limitations are such that only $5,000 or $6,000 (depending on his age) could be put into it per year. He could however use a variable annuity product where the gains would be tax deferred but I have a feeling that is not what he or you were hoping for. The IRS is fairly strict on tax deferred accounts and how they are funded.


It is quite possible I am drawing a complete blank on an obvious solution so if I think a better alternative, I'll add to the thread.

I didn't think it possible. Their initial thought was to use CDs to offset the interest on the loan and the loan interest as a deduction on their taxes. I'm not in their tax income bracket. They are getting close to the AMT. I tried to explain the tax man's tradition of getting his cut one side of the IRA or the other. And I didn't see it qualifying as a roll over because it never existed as an IRA in the first place. Their concept was sheltering un reported income as it was not earned in the conventional sense and how to best use it for retirement.