If you leave your job for any reason while you’re participating in a 403(b) plan, you can leave the assets in your former employer’s plan or the eligible substitute plan you’ve chosen, roll them over into an IRA, or, if it accepts rollovers, into your new employer’s plan.
You are eligible to move assets from a 403(b) into a 401(k) or 457 plan, if your new employer allows rollovers. Before 2002, you could roll a 403(b) only into another 403(b) — a rule that applied to 401(k)s and 457s as well. If you have a Roth 403(b), though, the only alternatives would be another Roth 403(b) or a Roth 401(k). There isn’t a Roth 457 option.
What are your options?
When you retire, you can leave your account balance in the provider’s plan and select one of the payout alternatives you’re offered, typically a lifetime annuity or periodic payments.
You also have the option of rolling over your assets into an IRA. If you have a traditional 403(b), you can roll over to a traditional IRA, and if you have a Roth 403(b), you can roll over to a Roth IRA. If your modified adjusted gross income is less than $100,000, you’re also eligible to roll your traditional 403(b) to a Roth IRA unless you’re married and file a separate federal income tax return. You’ll owe the tax that’s due on your contributions and earnings for the year the rollover occurs.
The advantages of choosing a rollover IRA are greater investment choice, potentially lower fees, and more flexibility in handling required distributions. The drawback, for some people, is the greater level of responsibility you must assume for managing your investments and your withdrawals.
