Why Roll Over TSA 403(b) to IRA?

Section 403(b) tax-sheltered annuity plans are roughly similar to 401(k) plans but are offered by not-for-profit organizations. When you leave a job at a not-for-profit, your 403(b) may be eligible for rollover. Taking the money out of a workplace plan and putting it in an individual retirement account can give you greater control of your nest egg.

Greater Flexibility

A 403(b) plan typically offers a limited number of investment choices. However, when you roll your funds over to an IRA, you're only limited by what your account custodian offers. Many custodians will let you buy just about any stock, bond or fund. A self-directed IRA can open up even more options, including alternative investments such as real estate and precious metals.

Lower Management Fees

Rolling your money over to an IRA could lower the fees you pay. On one hand, your IRA may impose transaction fees when you trade investments, while your 403(b) probably doesn't. On the other, you may be able to invest in funds that have lower management fees in your IRA, saving you money every year. If you don't trade a great deal, even small changes in your overall investment management fees can make a big difference.

Short-Term Loans

There is a loophole built into the Internal Revenue Service's IRA rollover provision that lets you take a short-term loan once a year. When you request an IRA rollover, you have 60 days to reinvest the money in another IRA before it's considered a taxable withdrawal. This means you could initiate a rollover, spend the money on something else and replace it, all within 60 days. The IRS lets you do this once a year.

Roth Rollovers

Another option when you roll over your 403(b) is to convert the funds into a Roth IRA. When you do this, you'll have to pay taxes on the money you pull out of your 403(b). However, once the cash goes into your Roth IRA account, you will be able to withdraw it and all of its growth tax-free when you retire. If you expect your tax rate to be higher when you retire than it is now, you may come out ahead by prepaying your taxes in a rollover now.

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About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

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