Resident 403b transfer

[centrebaseball]

I am a current PGY-4 resident about to graduate from a University that has been putting money into a 403b during my training. I will be graduating in June, and would like to carry this over as best I can to give me the most options and avoid taxes if possible. My only other current investment account is a Roth IRA (not fully funded) through Vanguard.

The advice I was given was to open a 457 through my University, and upon graduation, rolling my 403b into the 457 plan...with the idea that down the road after fellowship, etc. I could then consider keeping the 457 vs rolling into a 401k. Any thoughts?

[jfoxcpacfp]

Not a good idea. Once you leave the university, you'll have to roll the 457b to another NPO 457b or empty the account and pay taxes. 403b/401k monies rolled into a 457b are tracked separately because they are subject to different rules - you would owe penalty on any withdrawal and would want to roll separately into your new employer's job, a separate IRA, or into a SOLO-k that you have funded with IC income.

If you are about to graduate and leave the university, why would you want to do this? Also, if you can afford to put $$ into a 457b, why don't you use the $$ to finish filling out your Roth IRA?

[centrebaseball]

Great questions

The current 403b through the university has administrative fees (yearly and %), and I was told that if I rolled this into the 457 that I would be avoiding the fees (no yearly and smaller %), and still maintaining options in the future for rollover. The 457 I open would essentially be 20 bucks to open, just to give the 403b account something to roll over into. I don't plan on withdrawing this money and plan on keeping it as a tax deferred account. This 457 would probably eventually get rolled into wherever I end up down the road, so I wasn't told it's basically a lower fee account than the 403b to keep my money while finishing fellowship, etc before finding my attending job.

there is not much money going into the 457b, so my Roth isn't suffering. I'm hoping to have it funded by the end of the fiscal year.

Hope that helps clarify

this 403b account is FICA alternative, so to me it's basically 'free money' that I want to make work for me as best I can. I'd like to get it to the best account possible with the least amount of hassle

thanks

 

 

 

[DMFA]

Get independent contractor 1099 income and roll it into an individual 401(k). Rolling into 457s is a pain

[centrebaseball]

You mean get IC-1099 and open 401k and then roll the 403b into that account?

the guy at the university who manages all these retirement plans is going to set up/roll the 403b into the 457. Said it was the typical way residents held onto the money. Unless you are saying rolling out of a 457 is the tough part

[nachos31]

Yes, rolling out of the 457 is a lot tougher than a 401k or 403b bc a future employer needs to have the same kind of 457 (governmental vs nongovernmental; if you're coming from a state U residency then you have governmental most likely) AND accept rollovers. Those are big ifs.

[jfoxcpacfp]

centrebaseball wrote:

the guy at the university who manages all these retirement plans is going to set up/roll the 403b into the 457. Said it was the typical way residents held onto the money. Unless you are saying rolling out of a 457 is the tough part

Click to expand...

I am surprised you were told this. As nachos31 said, a 457b is not an easy account to work with and you must find an employer with a similar plan that will accept r/o's or you're stuck with emptying the account and paying taxes when you are later in a higher bracket. These plans are not typically allowed to be left behind with your prior employer. I still say keep it segregated from the 403b. No problem with funding the 457b itself, as long as you understand the implications.

[spiritrider]

As Johanna said, rolling the 403b over into a non-governmental 457b is possibly the worst thing you can do except cashing it all out and paying taxes and penalties.

Even if the 457b is a governmental 457b, the only benefit it probably provides is the ability to take distributions at any time after separation or retirement without penalty (if at the same employer).

If the fees are really that high, open a Rollover IRA at a low cost provider and roll the assets over. A 403b is typically a non-ERISA plan anyway, a 457b is never an ERISA plan, so there is no asset protection reason to keep it in either.