What Is a 403b Rollover?

When planning for retirement, understanding the various options available for managing your savings is crucial. One such option is a 403(b) rollover, a process that allows individuals to transfer funds from a 403(b) retirement plan to another eligible retirement account, such as an IRA or another employer’s retirement plan. This can be an important step for those looking to consolidate their retirement savings, potentially access a wider range of investment options, or take advantage of different tax benefits. A 403(b) plan is typically offered by public schools and certain nonprofit organizations, providing employees with a tax-advantaged way to save for retirement.

A financial advisor can help create a financial plan for your retirement needs and goals.

Understanding 403(b) Plans

A 403(b) plan is a tax-advantaged retirement savings account that’s designed for public school employees, individuals who work for certain nonprofit organizations and self-employed ministers. If you have access to a 403(b) at work, you can fund your plan through elective salary deferrals. Your employer can also make contributions on your behalf.

Money saved in a 403(b) is allowed to grow tax-deferred. For 2026, you can contribute up to $24,500, or up to $32,500 if you’re age 50 or older and qualify for the standard $8,000 catch-up contribution. If you’re ages 60 through 63, the higher catch-up limit is $11,250, allowing total elective deferrals of up to $35,750. Certain employees with at least 15 years of qualifying service may be eligible for additional contributions.

Beginning at age 59 ½, you can begin taking distributions from your 403(b) account without the usual 10% early withdrawal tax, although income taxes may still apply. Required minimum distributions (RMDs) generally begin at age 73 for those born from 1951 through 1959 and age 75 for those born in 1960 or later. Designated Roth 403(b) accounts are not subject to lifetime RMDs for the original owner.

Those conditions assume you’re saving in a traditional 403(b). If your plan allows it, you may be able to contribute to a 403(b) as a designated Roth account. Designated Roth contributions are made with after-tax income, so they won’t reduce your gross income for the year. But qualified distributions from a Roth 403(b), including earnings, are not taxable in retirement.

What Is a 403(b) Rollover?

A rollover simply means taking money from one retirement savings account and putting it into another. The IRS allows rollovers between different types of retirement accounts, including 403(b) plans. Where you can roll 403(b) savings to depends on whether your account was funded with pre-tax or after-tax dollars. If you saved in a traditional 403(b) plan using pre-tax money, you can roll your savings into any of the following:

Traditional individual retirement account (IRA)
Roth IRA
SEP IRA
SIMPLE IRA (if the SIMPLE IRA has satisfied its two-year participation requirement)
Governmental 457(b) plan
Pre-tax qualified plan, which includes 401(k) plans, profit-sharing plans, money purchase and defined benefit plans
Pre-tax 403(b) plan
Designated Roth account, which can be a 401(k), 403(b) or governmental 457 plan

Rollovers into employer-sponsored plans depend on whether the receiving plan accepts them. Moving pre-tax 403(b) funds into a Roth IRA or designated Roth account generally creates taxable income in the year of conversion.

If you set up your 403(b) plan as a designated Roth account, your rollover options are more limited. In that scenario, you could only roll your 403(b) savings into a Roth IRA or another designated Roth account.

How a 403(b) Rollover Works

A 403(b) rollover allows you to take the money you have in your retirement account and move it elsewhere. Typically, a rollover is something you’d only consider after separating from your employer, as 403(b) plans generally don’t allow them while you’re still employed or are under age 59 ½.

So, say you’re a college professor and you decide to take a teaching position at a new university. You could roll your 403(b) from your previous employer over to an IRA. Or you could roll it into the retirement account offered by your new school. Going forward, you could make contributions to your new employer’s retirement plan.

There are two ways a retirement account rollover can be executed: direct and indirect transfers. With a direct transfer, you tell your 403(b) plan custodian where you’d like the money to go. The custodian then transfers the funds to your new account on your behalf.

In an indirect rollover, the custodian sends the funds from your 403(b) to you. It’s then up to you to redeposit the money into a new retirement account. If you don’t make this deposit within 60 days from the date you receive the distribution, the money not rolled over is generally treated as a taxable distribution, unless an exception or IRS waiver applies. You’d owe income tax on the taxable portion, and depending on your age, you might also have to pay a 10% early withdrawal penalty.

How to Roll Over 403(b) Funds

If you’d like to roll over your 403(b) money, the first step is knowing what options you have. Again, where you can roll the money to depends on whether you have a traditional 403(b) plan or a designated Roth account.

Rolling 403(b) money into your current employer’s retirement plan might appeal to you if you want to have all of your retirement savings in one place. In terms of the tax breaks offered, 401(k) plans, 457 plans and 403(b) plans are very similar so you wouldn’t necessarily lose anything by moving your savings into one of these accounts.

Once you choose a destination for your 403(b) savings, you can then decide if you want to complete a direct or indirect rollover. Between the two, direct rollovers are usually preferable since there’s no risk of triggering any tax penalties from missing the 60-day deadline or failing to replace withheld funds, although a rollover into a Roth account may still be taxable. To complete a direct rollover, tell your 403(b) custodian where the money should go and the custodian will transfer the funds.

Once you choose a destination for your 403(b) savings, you can then decide if you want to complete a direct or indirect rollover. Between the two, direct rollovers are usually preferable since there’s no risk of triggering any tax penalties. To complete a direct rollover, you’d just have to tell your 403(b) custodian where the money should go and they’ll do the rest.

Keep in mind that if you opt for an indirect rollover, your plan is required by law to withhold 20% of the taxable amount. This 20% withholding goes to the IRS for federal income tax. To roll over the full taxable distribution, you must replace the withheld amount using other funds within the 60-day deadline. Otherwise, the portion not rolled over is generally taxable and may be subject to an early withdrawal penalty. So again, a direct rollover could make the most sense if you’d like to preserve your savings and avoid tax penalties.

Do You Have to Roll Over 403(b) Accounts?

If you decide to change jobs or retire, you don’t necessarily have to complete a 403(b) rollover. You could leave your money right where it is if you’re happy with your plan’s investment options and the fees you’re paying. If you decide later that you’d like to roll the money over, you could do so, either directly or indirectly.

Keep in mind that you may be subject to an automatic rollover, depending on your account balance. If your vested 403(b) balance is $7,000 or less, your employer may be able to distribute the funds without your consent, subject to the plan’s terms and applicable rules. For mandatory distributions exceeding $1,000, the plan generally must transfer the money to an IRA unless you choose another permitted option. In that case, you’d have to contact the employer or the plan administrator to find out where the money was moved to retrieve it.

What Happens to Your Taxes During a 403(b) Rollover?

The tax consequences of a 403(b) rollover depend on the account receiving the money and whether the transfer is direct or indirect. Moving pre-tax savings into another pre-tax retirement account generally does not create current federal income tax liability. Moving those savings into a Roth account, however, generally results in taxable income because the money is being converted from pre-tax to after-tax treatment.

Suppose you have $100,000 in a traditional 403(b) and want to transfer the entire balance to a traditional IRA. The following comparison shows how the two rollover methods work, assuming the entire balance is pre-tax and eligible for rollover.

Rollover Detail	Direct Rollover	Indirect Rollover
403(b) distribution	$100,000	$100,000
Mandatory federal withholding	$0	$20,000
Amount initially received or transferred	$100,000	$80,000
Additional funds needed to complete a full rollover	$0	$20,000
Taxable distribution if only the initial amount is rolled over	$0	$20,000

With a direct rollover, the full $100,000 moves into the IRA without mandatory federal income tax withholding. With an indirect rollover, the plan withholds $20,000 and sends you $80,000. You would need to deposit the $80,000 plus another $20,000 from other sources within 60 days to complete a full rollover.

If you roll over only the $80,000 received, the remaining $20,000 is generally taxable. For someone younger than 59 ½, that amount may also trigger a $2,000 early withdrawal tax, calculated as $20,000 × 10%, unless an exception applies. The $20,000 withheld is credited toward your federal tax liability when you file your return, but withholding does not make the unrolled amount tax-free.

Before requesting a rollover, confirm the destination account, whether your distribution is eligible for rollover and how the receiving institution will process the funds. Required minimum distributions, hardship distributions and certain other payments cannot be rolled over.

Bottom Line

A 403(b) rollover could be crucial for anyone looking to optimize their retirement savings strategy. A 403(b) rollover allows individuals to transfer funds from a 403(b) retirement plan, typically offered by public schools and certain nonprofit organizations, into another retirement account, such as an IRA or another employer-sponsored plan. This process can provide greater control over investment choices and potentially lower fees, which can significantly impact long-term savings growth.

Retirement Planning Tips

Consider talking to your financial advisor about the pros and cons of rolling over 403(b) plan money. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
A 403(b), 401(k) or IRA can all be great ways to save for retirement while enjoying some tax breaks. But you can also open a taxable brokerage account to supplement your savings. Taxable accounts can offer a greater variety of investment options than you might get with a tax-advantaged plan. You’re not subject to annual contribution limits either and many online brokerages now offer commission-free trading.