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Jerryd

403-b To Ira

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My question is, what advantages or disadvantages is it to rollover ones 403-b into a IRA once you have seperated from service/retire.

 

Does it limit on how and when I can get to my retirement account.

 

I have way over 30 years in education and am not sure as to if it is best to leave it with the 403-b company or transfer into a low fee IRA upon retirement

 

Currently my school does not offer a low fee 403-b.

 

 

Thanks in advance for you time and expetise.

 

Jerry

 

 

 

 

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Guest Joel

Dear Mr. and Mrs. Jerry and thanks for writing,

 

You need to know the following in order to make an informed decision.

 

With an IRA should you make sporadic withdrawals prior to age 59-1/2 you will subject yourself to a 10 percent federal excise tax. This does not apply if you make Substantially Equal Periodic Payments (SEPP) that last for at least five years or to age 59-1/2 which ever is later. See IRS Publication 590 for details. On the other hand, if you remain in the 403(b) and make sporadic withdrawals prior to age 59-1/2 such payments are exempt from the 10 percent penalty tax mentioned above. YOU NEED NOT REMAIN WITH THE CURRENT 403(b) PRODUCT PROVIDER TO RECEIVE THIS POTENTIAL ADVANTAGE OVER AN IRA. YOU CAN EFFECTUATE A REVENUE RULING 90-24 TAX-FREE CAPITAL TRANSFER OF YOUR CURRENT HIGH COST 403b TO A LOW/NO-LOAD 403b. I recommend TIAA-CREF and/or the Vanguard Group for this purpose. THIS ADAVANTAGE OVER AN IRA MAY ALSO BE EFFECTUATED BY ROLLING OVER TO ANOTHER QUALIFED PLAN LIKE A 401(K). THE MEMBERS OF THE NYCTRS TDA/403B PROGRAM HAVE THIS PARTICULAR OPPORTUNITY DUE TO THE FACT THAT THE CITY OFFERS A 401(K) TO ITS EMPLOYEES. WHAT A CITY!!

 

If you have a 403(b) balance as of December 31, 1986 said balance need not be withdrawn until age 75 provided it remains in a 403b account. This benefit is lost once that particular balance is removed from a 403b account and rolled over to some other retirement rollover account.

 

In my view I feel for most people a transfer/rollover to another 403b or qualified plan is in their best interests. If you are desirous of picking and selling individual stocks/bonds etc then you must go the IRA rollover route. But be sure you use a low cost broker for this purpose.

 

Peace,

Joel L. Frank

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Joel - Thank you for your time and effort.

 

On another matter, if you do not mind.

 

Our state teachers retirement system allow a person to retire and "take out" a lump sum of money. After taking the money out, it still allows one to have a pension, yet substantially less.

In "round figures" you get about $1,000.00 let per month but you can roll over the portion taken out into an IRA.

 

There are several different figures estimating the income you would need to off set the withdrawl, but a 9% figure is fairly well accepted. It would be around $140K that I would be taking out.

 

Anyones thoughts are appreciated.

 

Jerry

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Guest Joel

Jerry,

 

I am a big fan of taking the money and rolling it over to a plan that does not compel you to annuitize, as Teachers' Retirement Systems do. By so doing your $140,000 becomes a double edge saw---a wealth builder as well as an income provider. Why make an irrevocable decision at the young age of 56 to annuitize starting at age 56. Where is the fire???---the urgency? Moreover, if you can live on $12,600 less per year you do not have to tap the rollover account for 14 years, when you turn 70.5.

 

Note: THE 9 PERCENT ANNUITY INCOME RATE CONSISTS OF PURE INTEREST AND A RETURN OF PRINCIPAL ($140,000). THE ANNUITY RATE WILL, THEREFORE, ALWAYS BE MORE THAN THE INTEREST ON AN INVESTMENT GRADE BOND.

 

Peace and hope,

Joel

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Joel - Thank you for your advice in this matter.

 

My wife will be in a very similar position in a few years.

 

The withdawl money from the state [ hers and mine added in both cases] together with our 403-b [ hers and mine added] funds should be in the neighborhood of $900K+ minimum and possibly more.

 

Thanks Jerry

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