When Does a 403b IRA Rollover Make Sense?

As you perform your annual financial review, you may want to consider rollover of money from your current 403b IRA to another retirement account. There are as many reasons to do a rollover as there are account holders, but there are a few generalities that can guide you as you make your decisions about performing a 403b IRA rollover.

First, has there been a change in your employment status?  One of the most common reasons to consider a 403b IRA rollover is that you have access to a new IRA that’s a better fit for your investments.  Perhaps you have a new job that offers a more advantageous retirement savings plan or one which will match any contributions you rollover into the new account.  Or perhaps you’re eligible to open a private IRA with a brokerage firm that offers a greater number of investment opportunities or a higher rate of return.  You’ll need to carefully assess the performance of both your existing 403b account and the potential target account before initiating a 403b IRA rollover.

Next, you should consider your long term investment goals.  Would it be a good idea to have all your money in one account, or is having parallel investments a better choice for you?   A good way to approach this decision is to think about how close you are to cashing out your accounts.  If that possibility is relatively far away, then having more than one account may be fine for you.  But if you’re within, say five years of retirement, then consolidating the money into your best performing account may be a better choice for you.

Of course, you also need to consider what kind of IRA your potential target IRA is and whether or not it can accept your 403b IRA rollover.  For example, there are a few different types of accounts that cannot accept rollovers from a 403b, including a Simple IRA or a Designated Roth IRA.  If you have one of those, then these considerations become a moot point.  If, on the other hand, your new account can accept the rollover, then you can move on to the final point – the performance of both accounts.

Take some time to compare the performance of both the new IRA and the existing 403b.  How do the rates of return measure up?  Of course, return on investments alone isn’t enough to choose one account over the other, as performance is more complex than that.  You should also consider whether their investment strategies are in line with what you want for your money.  Higher risk investments may be fine if you’re just starting to save for retirement, but you’ll want to take a more modest approach if you’re nearing retirement.  If the new account seems to outshine your existing 403b, it may be time to perform a 403b IRA rollover.

Finally, don’t forget customer service.  This is an important part of what you’re paying for, after all.  Have the managers of your old 403b been hard to contact and slow to fulfill your orders?  If so, a 403b rollover may be a good choice for you.  Ask around about the how the new account has treated its account holders.  Satisfied clients will be more than happy to provide you with references upon request.

When Does a 403b IRA Rollover Make Sense?
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Originally posted 2017-01-12 18:07:11.