A Guide to Rolling Your 403(b) into an IRA

Written by Carson Hamill CIM®, CRPC®, Associate Financial Advisor & Assistant Branch Manager & Dean Moro BComm, CIM®, Financial Advisor & Associate Portfolio Manager

Effectively managing your retirement savings requires adaptability. Life changes, whether through shifts in employment or relocations to new countries, may necessitate a reassessment of your financial strategy. In such situations, exploring options for your 403(b) plan becomes essential. This blog will focus on a popular choice: Transferring your old 403(b) into an Individual Retirement Account (IRA).

Understanding 403(b) Rollovers to IRAs

Initially tailored for employees of public schools, tax-exempt organizations, and specific ministers, the 403(b) plan stands out as an invaluable tool for retirement savings. However, circumstances change, and when no longer affiliated with the sponsoring employer, it becomes imperative to explore rollover options. The pivotal question emerges: Why should you roll your old 403(b) into an IRA? The following points outline the compelling reasons for transitioning from a 403(b) to an IRA:

• Continued Tax Deferral
• Enhanced Investment Options
• Consolidation and Convenience
• Improved Communication
• Decreased Fees and Costs
• Estate Planning Benefits
• Access to Professional Advice

Continued Tax Deferral

One significant advantage of rolling your 403(b) into an IRA is the continuation of tax deferral. Choosing a Traditional IRA allows you to maintain tax advantages associated with retirement savings, ensuring a seamless transition.

Enhanced Investment Options

IRAs provide a broader range of investment options compared to 403(b) plans. This flexibility empowers you to tailor your investment strategy to align with your unique financial goals and risk tolerance. To give you an example, imagine your 403b is like a special piggy bank for your retirement. When you roll it into an IRA, it's like taking all the coins from that piggy bank and putting them into a bigger piggy bank. The bigger piggy bank gives you more options on how to use your money and can sometimes give you more treats when you're older.

Consolidation and Convenience

If you already have an existing IRA, consolidating your 403(b) funds into it simplifies your financial portfolio. This streamlining enhances convenience and makes it easier to track and manage your retirement savings under one roof, especially when it is time to start withdrawing annual required minimum distributions.

Improved Communication

Keeping your 403(b) with an old employer might sound okay, but it could make things a bit tricky. You might miss out on helpful advice about where to put your money and how to make it grow. Also, if you move away from the United States, it might be harder to keep track of what's happening with your retirement savings. Rolling your 403(b) into an IRA makes things simpler. You'll have better communication and easier access to important information about your plan, which means you can stay on top of your finances without any worries.

Here is an example: Imagine your 403(b) is like a special toy you got from your old school. If you keep it there, it's like leaving your favorite toy behind when you move to a new house. You might forget about it, and you won't get any cool new toys to play with. But if you bring your toy with you to your new house, it's like rolling your 403(b) into an IRA. You can still play with your toy, and you'll get even more toys to play with too! Plus, if you ever want to know where your toys are or if they're safe, it's much easier to check when they're all in one place.

Decreased Fees and Costs

Transferring funds into an IRA can alleviate the burden of management and administrative fees that might be eroding your investment returns in a 401(k) plan. While a Rollover IRA may not be fee-free, it grants increased flexibility and control over investment choices, locations, and associated costs.

Estate Planning Benefits

Differing from a 403(b) that may distribute funds as a lump sum to beneficiaries, IRAs provide enhanced flexibility. An important feature is the ability to designate a beneficiary, including non-spouse beneficiaries such as adult children. When the beneficiary receives the IRA, they have the option to transfer it to an inherited IRA, subject to rules that allow for the assets to be disbursed over a 10-year period, making it a more appealing option. It's advisable to engage in a discussion with your plan administrator to confirm that your preferences align with your estate planning objectives.

Access to Professional Advice

Managing an IRA opens the door to professional investment advice from Registered Investment Advisors, providing guidance as you navigate the complexities of retirement investments. Click here to learn more.

Summary

While navigating life changes or transitioning away from a former employer might seem complex, managing your retirement savings doesn't have to be. Rolling your 403(b) into an IRA is a common and effective strategy, offering enhanced control, diverse investment options, and other key advantages. Consulting with a cross-border financial advisor is crucial to ensuring the chosen path aligns with your unique circumstances and long-term goals. Call us today to discuss whether a 403(b) rollover makes sense for you.

About Snowbirds Wealth Management

Gerry Scott is a portfolio manager and founder of Snowbirds Wealth Management, an advisory firm focussed on the cross-border market. Together with Dean Moro and Carson Hamill, associate portfolio managers with Snowbirds Wealth Management, they provide investment solutions for Americans living in Canada, and Canadians residing in the United States. Licensed in both Canada and the US, they provide tailored investment solutions to minimize the tax burden when moving assets across borders.To schedule an introductory call, please click here.

Statistics and factual data and other information are from sources RJLU believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities nor is it meant to replace legal, accounting, taxation or other professional advice. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The information is furnished on the basis and understanding that RJLU is to be under no liability whatsoever in respect thereof.

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