What to Do With Money in a 403b Retirement Plan When Leaving a Job
Leaving a job can be stressful. You have a lot of things to think about and only a short amount of time to make decisions that can have a lifelong impact. One of those decisions involves your 403b retirement plan, and it is important to handle that money properly. The options you have depend on your plan, and they can include leaving the money where it is, rolling it into a new retirement plan or moving it to a self-directed IRA.
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Leave It Be
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The company you are leaving might allow you to keep the money right where it is. If so, you can leave the money invested with the current administrator. This can be a good choice if you have been pleased with the performance of the fund, and if you are satisfied with the range of investment choices. You might need to change the delivery options for your 403b statements, particularly if you currently receive those statements through your work email address. You also need to watch the future performance of the funds carefully and be ready to move the money if the performance drops or the range of investment options changes.
Rollover to New 403b
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If your new job offers its own 403b plan, you might be able to roll the money from your old plan directly to the new one. To find out if this is an option, just contact the human resources department at your new employer. If you are permitted to roll the 403b directly into the new plan, just fill out the forms HR provides you. Be sure to include a copy of a recent 403b statement, along with the account number of the plan and its estimated balance.
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Self-Directed IRA
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Rolling the money in your 403b plan over to a self-directed IRA has a number of important benefits. For one thing, you get more control over the money and you can invest it however you wish. When the money is in a 403b plan you have a limited number of mutual funds from which to choose. When you roll the money over into a self-directed IRA you can invest in whatever mutual funds you want, as well as individual stocks, bonds and fixed income investments. If you wish to roll your 403b money into a self-directed IRA, contact the administrator you want to use and request a direct rollover. Rolling the money directly from one administrator to another preserves the tax advantages of the fund and allows you to avoid any penalties.
Take the Money
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You can take the money in your 403b when you leave your job, but if you are under age 59 1/2 this should be a last resort. If you take the money out of your 403b, you could be subject to severe tax penalties, as well as ordinary income taxes on the money you withdraw. The combined impact of these taxes and penalties could eat up a quarter to a third of the money in the plan. In addition, taking your retirement money early can leave you ill prepared for retirement when it does happen.
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References
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