What to do with 403B?

[aimlesstourist]

My SO has recently quit his job and he is currently unemployed. He had some money in a 403B but we were unsure as to whether or not to keep the 403B until he gets a new job and to roll it over to a new employer investment account, or if he should roll it over now into an IRA?

Also, his old employer's contributions have not yet vested for him but they are still in the account even after 4 months. Do we just leave that portion alone? And if so, is it only contributions or contributions and gains/losses?

Thank you.

[maizefolk]

A good rule of thumb is that whenever you have the chance to roll money from a 401k or 403b into an IRA you should do so. It doesn't hurt and often helps. An vanguard/fidelity/schwab IRA will have the same or better investment options and the same or better expense ratios and is less likely to have hidden fees or expenses.

The only exception is if he anticipates wanting to make backdoor Roth IRA contributions in the future and he doesn't already have a traditional IRA account. In that case having a significant traditional IRA balance can make the backdoor Roth more difficult to pull off.

[aimlesstourist]

Got it, will look into options for rolling it over. We don't earn enough to do backdoor Roth after checking, but good to keep in mind!

A good rule of thumb is that whenever you have the chance to roll money from a 401k or 403b into an IRA you should do so. It doesn't hurt and often helps. An vanguard/fidelity/schwab IRA will have the same or better investment options and the same or better expense ratios and is less likely to have hidden fees or expenses.

The only exception is if he anticipates wanting to make backdoor Roth IRA contributions in the future and he doesn't already have a traditional IRA account. In that case having a significant traditional IRA balance can make the backdoor Roth more difficult to pull off.

[JupiterGreen]

The rules for our 403Bs are different than IRAs. We can contribute more, but I can't remember if there are better rules for distribution. Since I'm on my way out right now, I'm just going to suggest that you take a look at your 403B compared to other accounts to make sure there isn't any advantage you are leaving on the table by rolling it over.

Here is the info I found at the IRS:

In addition to loans and hardship distributions, a 403(b) plan may allow employees to take money out of the plan when they:

reach age 59½;
have a severance from employment;
become disabled;
die; or
encounter a financial hardship.
Employees may also receive a qualified reservist distribution.

Eligible distributions may be rolled overPDF to another plan or an IRA.

The employee will have to pay taxes on any amount of the distribution that was not from designated Roth or after-tax contributions and may have to pay an additional 10% early distribution tax unless an exception to this tax applies.

[aimlesstourist]

SO and I decided to go ahead and rollover to a trad IRA. Thanks everyone!