How to Convert 403b to Roth IRA


The 403(b) is like a 401K for employees of tax-exempt organizations, such as schools, non-profits, and certain hospital and religious organizations. Your contributions are deducted from your pay before any taxes are taken out, and your employer may choose to make matching contributions. Money grows tax-deferred until withdrawal. Naturally, you will want to take your money with you if you leave that employer. Converting your 403(b) to a Roth Individual Retirement Account (IRA) is a reasonable option, as the Roth is a flexible retirement savings option with significant tax advantages.

Things You'll Need

  • 403(b)
  • Roth IRA
  • Get in touch with your 403(b) plan administrator. If you are leaving your employer, you may be provided with information on whom to contact about your account.

  • Ask her to make a direct, or trustee-to-trustee, rollover from your 403b to your Roth IRA. A direct rollover is the easiest way to avoid triggering withholding and tax penalties. Because the money never touches your hands, so to speak, it will not be subject to taxation, and your employer will not be required to hold onto any of your money. Should you elect to have a check for your 403(b) funds mailed to you, your employer will have to withhold 20 percent of the total sum. You will still be required to deposit into the Roth an amount equal to 100 percent of your 403(b) money, which means you will have to make up the 20 percent difference with money from some other source. Further, to avoid an Internal Revenue Service (IRS) penalty, you must deposit the 403(b) funds into the Roth within 60 days of receiving them.

  • Withdraw from your Roth IRA with care. You can withdraw regular yearly contributions from a Roth IRA any time you want. But there are restrictions on withdrawing money that was rolled over from an account funded by pretax dollars. For that matter, there are restrictions on withdrawing interest on any Roth IRA deposits. Should you wish to take money out of your Roth, be sure you are withdrawing no more than the principal amount of your regular annual contributions.

Tips & Warnings

  • Investigate what is called a Conduit IRA if you think you will want to put your converted 403(b) funds into another 403(b) in the future.
  • A competent tax advisor or financial professional is an excellent source of information and counsel about what to do with your retirement money and when.


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