Rollover 403b to IRA

Hi folks, this is Greg Shepard with S&A Financial Services.  A lot of you have been directed to this blog from my podcast, HigherEd Retire.  If you're not familiar with the podcast, this is where you can find ALL KINDS of information regarding your higher ed retirement plan that you can't find anywhere else.  There's A LOT of unknow and little used features of your plan that you NEED to be utilizing.  

For those of you that aren't familiar with me and my firm, I'm located in the Kansas City area and I specialize in helping those in higher education navigate and get the most out of their retirement plans.  I've been helping people like yourself for 20 years now.  If you find yourself in the weeds as your reading this blog, or my other blogs as well, feel free to contact me via email at greg@shepardfinancial.com

This blog is going to focus on a rather simple feature/provision of your university 403b.  Rolling that account over to an IRA.  I've received a number of emails lately from those listening to my podcast surrounding this topic.  Hence, the catalyst for today's topic.  

In this blog, I'll discuss 3 situations as to when you'd want to look into rolling your 403b to an IRA.  I'll also get into the "How, Where, and Why" of this topic.  FYI... as I go forward in this blog, when I refer to a "403b," the rules stated should apply to your 457b, and your 401a.  However, your 401a may be more restrictive so make sure to contact a qualified financial advisor that specializes in those types of accounts for further questions.  

Following are the 3 situations when you'd look to rollover your 403b to IRA...

1) You have an old employer 403b.  A lot of folks have this out there.  Basically, you have 3 options with these accounts.  First, you can leave it in your old employers plan (I'm not too hot on this option).  Second, transfer that old 403b to your current higher ed institution plan, if allowed (I like this better than option 1, but still not thrilled about it).  The option I'd opt into looking at the most is rolling that old 403b to an IRA at a vendor that you get to choose (Schwab, Fidelity, Vanguard, TD Ameritrade, etc...)

2) You've retired.  Take that old 403b and roll it over to an IRA.  With this new Rollover IRA you can start taking distributions at RMD age or before, if you so choose.  Side note - it's been my experience that when trying to take distributions from a 403b within your old employers plan, it can be a logistical headache.  Reason being is that your old 403b plan is still under the "umbrella" of that ex-employer.  Therefore, they'll need to approve transactions (distributions) in that account.

3) Most higher ed institutions will allow in-service transfers of your 403b if you're over the age of 59 1/2.  This rule is plan specific, so make sure to ask HR or your plan vendor for details on this.  This would be good if your higher ed institution doesn't have great investment options - I can think of a few institutions where this strategy would come into play.

* Any time you implement strategies involving moving funds from one account to the next, MAKE SURE to know what your costs are in your current plan AND the new plan.  I do this for all my clients transferring accounts - it helps to make a more informed decision.

Next, how would one go about making these transfers discussed above?  Paperwork, paperwork, paperwork!  It's actually very simple, but can get confusing for those not really knowing what they're doing.  Especially if you're dealing with TIAA Traditional account.  Watch out for those accounts!  They can be tricky!  To get the logistics on how to implement the transfer(s), just call your vendor (like a TIAA or Fidelity) and have them walk you through the steps / paperwork.  If you have a competent financial advisor, this person should take care of this for you.  

Next, where do you transfer the money after you've decided to implement one of the strategies above?  I mentioned it above, but you can transfer to just about any custodian of your choice.  For the sake of transparency, I custody my clients accounts that are outside their retirement plans at Charles Schwab.  

Next, maybe the most important questions you should ask yourself, is WHY would I want to do this?  

• Access to thousands of investment options.  Inside your higher ed retirement plan, you may have 20ish investments to choose from.  IRA at Charles Schwab - thousand's of options.  This is where I pique people's interest because you can now access any sector you'd like - alternative energy, health care, technology.... You name it, you can get it in a Rollover IRA.

• Simplicity of distributions.  Remember, I stated earlier that if you were to leave your 403b plan with your old employer, you'd still have to go through them (the employer) when distributing money.  I speak from experience when I say that it's not always seamless when working with higher ed HR / Benefits department. 

I'll reiterate a very important piece of information for you to remember.  ALWAYS know your fees.  Have it in writing.  I do this for clients / prospects because I view it as a part of my fiduciary promise.  

I'll leave you with this offer, if you contact me via email at greg@shepardfinancial.com, tell me you read this blog, and I will analyze all of your options for free.  I have some sophisticated software that can tell you all about each option, the costs associated with it, and the quality of investments you can choose from.  This offer would be well worth your time.  

My goal here was for you to take away 1 or 2 pieces of information that you can implement today in your retirement.  Again, please educate yourself even more by listening to my HigherEd Retire Podcast.  Thanks folks, and remember - Take Control of Your Retirement Today!

S&A Financial Services, Inc. is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.