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How to Roll Over a 403(b) to an IRA


A 403(b) is a tax-advantaged retirement account built for employees of tax-exempt organizations and public school teachers. It works like other tax-advantaged retirement accounts, including 401(k)s offered by private employers and IRAs offered to individuals. In some cases, like when you change your job, you may want to move your money out of your 403(b) account. Here’s what you need to know before you roll over a 403(b) to an IRA.

A financial advisor can help you roll over an orphaned retirement account into a new one and walk you through different options for your financial plan.

What Is a Rollover?

A rollover happens when you move money from one retirement account to another. For example, if you take all the money from an employer-run 401(k) and put it into an IRA, this would be a rollover.

Although this financial move involves taking money from your retirement account, a rollover is not considered a withdrawal as long as you follow the rules. Most importantly, you need to place the money in another qualifying retirement account quickly, usually within a 60-day window.

The IRS allows you to roll money over between certain types of tax-advantaged retirement accounts. In the case of a 403(b), you can roll your money over based the type of account you opened.

If you have a traditional 403(b), meaning you don’t pay taxes on the money you contribute to the account, you can roll your funds over to retirement accounts that include:

  • Any pre-tax contribution IRA (including SEP and SIMPLE IRAs)
  • Roth IRA
  • 401(k)
  • Roth 401(k)
  • A different 403(b) portfolio
  • Roth 403(b)

If you have a Roth 403(b), meaning that you don’t pay taxes on the account’s gains, then you can only roll money over to another Roth account. This would include a Roth IRA, a Roth 401(k) and a different Roth 403(b).

How Do You Roll Over a 403(b) to an IRA?

SmartAsset: How to Roll Over a 403(b) to an IRA

To do a 403(b) rollover, you generally need to meet one of two criteria:

  • You have left your employer for a different job or employer
  • You have left your employer and do not have a new one

As a general rule, you cannot roll your 403(b) over into another account unless you have left the employer that sponsored this plan. This includes IRA rollovers, meaning you can’t take your 403(b) funds and transfer them to an individual retirement account unless you leave that job.

However, if you are moving between two jobs that both offer 403(b) plans, you might want to consider taking the opportunity to roll your old 403(b) plan into an IRA. While 403(b) plans have gotten better in recent years, they still offer limited investment options compared with an IRA or a 401(k). You might be able to get more growth out of your retirement account if you roll it into an IRA when you have the chance.

To conduct a 403(b) rollover, you would pursue either a direct or an indirect transfer.

Direct Transfer

With a direct transfer, your plan custodian handles the actual transfer of funds.

In this case, you first need to set up the IRA or Roth IRA account that you’ll transfer the 403(b) into. Once you’ve set up your IRA account, you contact the plan custodian for your 403(b) and tell them that you would like to make a rollover. You will then have to give them the account information for your IRA so the custodian can execute the transfer of funds and move the money directly from one account to the other.

Indirect Transfer

With an indirect transfer, you handle the funds yourself.

As above, first you need to set up the IRA or Roth IRA account that you’ll use. It’s very important that you do so, because the money from your 403(b) needs to go into a new tax-advantaged account. If possible, you are typically better off using a Roth IRA as the tax advantages to this account are generally better than a pre-tax contribution account.

Once again, you contact your 403(b) plan custodian, but in this case you ask them to send you the funds directly. After you get the money, you can hold it in a personal bank account, but you must move it into a qualifying IRA account within 60 days. If you take longer, the IRS will treat this as an early withdrawal, with all appropriate taxes and penalties.

Indirect transfers are generally a bad idea because the IRS requires your plan custodian to withhold 20% of the 403(b) account’s funds for taxes. This isn’t a permanent loss. As long as you properly roll your funds over into a qualifying retirement account you can reclaim that 20% withholding when you file your taxes at the end of the year, but it does mean that those funds will lose out on a year of growth. In most cases, a direct transfer is preferable, if available.

Bottom Line

SmartAsset: How to Roll Over a 403(b) to an IRA

A 403(b) plan is a specialized form of tax-advantaged retirement account designed for public school teachers and nonprofit employees. Their investment options are relatively limited, so if you are changing employers you might want to roll the funds over into an IRA.

Retirement Planning Tips

  • A financial advisor can help you create a financial plan for your retirement needs and goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • When you have the choice, an IRA typically offers more investment options than a 403(b), due to IRS restrictions. Here’s what you need to know when comparing a 403(b) vs. IRA.

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