Rollover rules and restrictions for 403(b) accounts are very clear and somewhat restrictive. You can't move the money unless you meet certain criteria and possess supporting documentation. If you work for a church, school or other tax-exempt organization that offers a 403(b) retirement plan, you should familiarize yourself with the rollover rules to avoid any possible confusion in the future.
The IRS has declared the official retirement age as 59 1/2 for purposes of retirement accounts. If you are at least this age and have money in a 403(b) account, you are eligible to roll that money over to a traditional IRA. The website Good Financial Cents explains that a direct rollover is most advantageous because by allowing your 403(b) provider to transfer the money directly to an IRA custodian, "you will avoid the mandatory 20 percent federal income tax withholding assessed on retirement funds withdrawal."
You may roll over your 403(b) when you change jobs. If your next employer offers a retirement plan that accepts 403(b) rollovers, and your previous plan permits rollovers to other group plans, you can choose to transfer your balance. The IRS refers to this process as a "plan-to-plan" transfer but warns that "your accumulated benefit after the transfer must be at least equal to what it was before the transfer" and "the new plan's restrictions on distributions must be the same or stricter than those of the original plan."
If you are the beneficiary listed on a 403(b) and the owner of that account dies, you are permitted to roll the balance in the account over to a traditional IRA. However, that IRA must remain titled to the deceased, and required minimum distribution rules will still apply. When the original account owner would have reached age 70 1/2, you must begin taking withdrawals and paying any applicable income taxes. The investment house T. Rowe Price explains on its website that "assets inherited from traditional IRAs and 403(b) accounts become taxable to the beneficiary when he or she takes a distribution from his or her beneficiary account."
Qualified Domestic Relations Order
If you receive a qualified domestic relations order, called a QDRO, stating you are entitled to a portion of your ex-spouse's 403(b), the custodian will roll over the amount stipulated to an account of your own. According to the investment house Vanguard on its website, "a distribution from the account to an alternate payee pursuant to a qualified domestic relations order (QDRO) ... is permitted without regard to whether the participant has had a severance from employment or any other event permitting a distribution to be made."
- IRS.gov: Publication 571 -- Tax-Sheltered Annuity Plans (403(b) Plans)
- 403bWise: Rolling a 403(b) Into an IRA
- Good Financial Cents: Can You Rollover a 403(b) Into a Traditional IRA?
- T. Rowe Price: Guide for IRA and 403(b) Account Beneficiaries
- Vanguard: Opening a Vanguard 403(b)(7) Individual Custodial Account
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