If you have a traditional 401(k) or 403(b), you can transfer your money to a Roth IRA. However, this would be considered a conversion to Roth, so you would have to declare the money as income when you pay your tax return and pay ordinary income tax on income. It's true that you can transfer funds from your 403(b) plan to an IRA, but you should also consider a few other options. You can transfer the funds to another retirement plan, withdraw money from your 403(b) plan, or keep the funds in the 403(b) plan. The decision will depend on your employment situation, your investment experience, the costs of the various investment options, and your objectives for investing the funds.
Direct reinvestment of 403(b) can be simple, but indirect reinvestment can result in taxes and penalties if you don't meet the 60-day deadline. A 403(b) reinvestment allows you to transfer your retirement savings from a 403(b) plan to an IRA or other retirement plan when you change jobs or retire. 403(b) reinvestment is the transfer of funds from a 403(b) plan in your name to an individual retirement account you own. To transfer a 403(b) to an IRA, you must transfer money from a retirement account to an individual retirement account. You should also consider the fees and expenses of any investment, but especially those you have to pay when requesting a reinvestment from the 403(b) plan and when opening a new IRA account.
If the plan administrator sends you a check, this is called indirect reinvestment and you must deposit the funds into your new IRA no later than 60 days after the date the money was withdrawn from your 403(b) plan. Since contributions to a Roth IRA are made with after-tax money, distributions from your Roth IRA when you retire will also be tax-free. Generally, the IRA custodian or trustee only requires a signed contribution form to deposit the funds into an IRA. When you make a direct transfer from the 403(b) plan to a new IRA account, you shouldn't have to pay any taxes or penalties at the time of the transfer, but we recommend that you talk to your personal tax and legal advisors about your specific tax situation. If you are a beneficiary other than your spouse, you must complete a direct transfer to an IRA that you have established to receive your inheritance.
