Roth 403b rollover into roth IRA questions

[skitelz]

Hello,

I have approximately 10k in a 403b from residency, of which all 10k is a roth contribution. I graduated residency in 2020 and started my first job July 2020, and as such I'm not eligible for the 401k here yet. I also have a roth IRA with approximately 20k. From what I've read, it's generally better to roll your roth 403b into your roth IRA when leaving your employer so you can take advantage of better access to cheap index funds, and simplify your portfolio to keep it in fewer places, with the disadvantage being possibly less asset protection in a roth IRA; however, in my state, a roth IRA is protected in bankruptcy up to 1 mil, so I am comfortable with slightly less asset protection to simplify my finances, especially given my meager sums in my accounts.
Is it as easy as going into my roth IRA and clicking on transfer funds and transferring from my 403b? I've read that when you do this, you have to pay taxes on the conversion, but by tax bill should be 0 because all my contributions were roth, correct?
I've also read that when you transfer funds into your roth IRA like this, it counts towards your $6000 contribution for the year. Is this true? I currently fund my roth IRA through a backdoor contribution, and I wouldn't want my rollover from my 403b to count towards this because then it would take 2 years to get it rolled over and I'd miss out on backdoor contributions for those years.
Another thought I had is should I just hold out until I'm eligible for my 401k at my current job and then rollover my 403b into that? But would that then complicate my 401k because I'd have 10k in roth contributions and the new funds when then be tax deductible contributions? And would a rollover there count towards the $19500 contribution limit for the year?

I appreciate your help and advice!

[Peds]

you request a rollover from the custodian.

no. read: https://forum.whitecoatinvestor.com/...-ira-home-base

[jhwkr542]

Hello,

I've also read that when you transfer funds into your roth IRA like this, it counts towards your $6000 contribution for the year. Is this true?

No. Rollovers and contributions are not the same.

Another thought I had is should I just hold out until I'm eligible for my 401k at my current job and then rollover my 403b into that?

I wouldn't. Also no guarantee they allow rollovers, so I'd move it to the Roth IRA.

But would that then complicate my 401k because I'd have 10k in roth contributions and the new funds when then be tax deductible contributions?

Possibly. Depends on the service provider. I'm pretty sure people with my group have had this issue on not being able to invest the different contributions types differently.

And would a rollover there count towards the $19500 contribution limit for the year?

No. Rollovers and contributions are not the same.

[skitelz]

Got it this will be simple then, thank you!

[spiritrider]

Hello,
Another thought I had is should I just hold out until I'm eligible for my 401k at my current job and then rollover my 403b into that?

I wouldn't. Also no guarantee they allow rollovers, so I'd move it to the Roth IRA.

I'm going to take a contrarian position.

Once you rollover a designated Roth account in a 401k, 403b or 457b to a Roth IRA, it can never be rolled over into another designated Roth account. Roth IRAs can only be rolled over to another Roth IRA.

There are tradeoffs between a designated Roth account and a Roth IRA.

• Roth 401k
  • Pros: Full ERISA anti-alienation asset protection and exception to the 10% early withdrawal penalty for distributions after separation >= the year you turn age 55.
  • Cons: Non-qualified distributions are proportionally contributions and earnings.
• Roth IRA
  • Pros: Non-qualified distributions are ordered with contributions coming out first without penalty or tax.
  • Cons: About 20% of states do not provide the unlimited ERISA asset protection a Roth 401k does. There is no age 55 exception to the non-qualified 10% early withdrawal penalty prior to age 59 1/2.

I have never seen a 401k plan that didn't accept rollovers from another 401k, 403b or 457b plan. Even if the plan doesn't or doesn't even have a designated Roth account. There is no reason the Roth 401k account can't stay there indefinitely unless it's costs are really high. It certainly can wait until the options of the attending plan are known.

[Bmac]

I'm in the rollover to Roth IRA camp. It will just make things simpler and easier down the road. Fewer accounts at fewer custodians. Less potential for problems down the road when you might be trying to rollover both Roth 403b/401k and traditional 403b/401k to your respective IRAs. And it won't complicate future backdoor Roths either.

[notanotherusername]

I'm going to take a contrarian position.

Once you rollover a designated Roth account in a 401k, 403b or 457b to a Roth IRA, it can never be rolled over into another designated Roth account. Roth IRAs can only be rolled over to another Roth IRA.

There are tradeoffs between a designated Roth account and a Roth IRA.

• Roth 401k
  • Pros: Full ERISA anti-alienation asset protection and exception to the 10% early withdrawal penalty for distributions after separation >= the year you turn age 55.
  • Cons: Non-qualified distributions are proportionally contributions and earnings.
• Roth IRA
  • Pros: Non-qualified distributions are ordered with contributions coming out first without penalty or tax.
  • Cons: About 20% of states do not provide the unlimited ERISA asset protection a Roth 401k does. There is no age 55 exception to the non-qualified 10% early withdrawal penalty prior to age 59 1/2.

I have never seen a 401k plan that didn't accept rollovers from another 401k, 403b or 457b plan. Even if the plan doesn't or doesn't even have a designated Roth account. There is no reason the Roth 401k account can't stay there indefinitely unless it's costs are really high. It certainly can wait until the options of the attending plan are known.

Isn't another Con for the Roth 401k the requirement for eventual RMDs? Athough admittedly OP is presumably many years away from this.

[spiritrider]

Sure, but that is easily addressed by rolling over to a Roth IRA no later than the year prior to the year RMDs start. In almost all cases most people would be better of rolling over to a Roth IRA, the later of separation or 59 1/2.

[jhwkr542]

I'm going to take a contrarian position.

Once you rollover a designated Roth account in a 401k, 403b or 457b to a Roth IRA, it can never be rolled over into another designated Roth account. Roth IRAs can only be rolled over to another Roth IRA.

There are tradeoffs between a designated Roth account and a Roth IRA.

• Roth 401k
  • Pros: Full ERISA anti-alienation asset protection and exception to the 10% early withdrawal penalty for distributions after separation >= the year you turn age 55.
  • Cons: Non-qualified distributions are proportionally contributions and earnings.
• Roth IRA
  • Pros: Non-qualified distributions are ordered with contributions coming out first without penalty or tax.
  • Cons: About 20% of states do not provide the unlimited ERISA asset protection a Roth 401k does. There is no age 55 exception to the non-qualified 10% early withdrawal penalty prior to age 59 1/2.

I have never seen a 401k plan that didn't accept rollovers from another 401k, 403b or 457b plan. Even if the plan doesn't or doesn't even have a designated Roth account. There is no reason the Roth 401k account can't stay there indefinitely unless it's costs are really high. It certainly can wait until the options of the attending plan are known.

As OP mentioned, they get $1MM asset protection, so it may be hard to get to much over that number with only $6k/yr contributions. It'll take good returns for 30 years. Certainly possible, but it'll take a while. Another point would be fees within a 401k. If a 401k is charging AUM fees for recordkeeping or an advisor to the plan, that would also come into play. Fund choice also unlimited in the IRA. For age 55 vs 59.5 distribution, if OP retires by this age, they would presumably have other assets to access.

[spiritrider]

I'm not talking about bankrupty protection.

Although, the OP may be confusing state bankruptcy protection with federal bankruptcy protection. This is $1M inflation adjusted since 2005 (4/1/19 = 3/31/22 = $1,362,800. Not to mention Rollover IRAs receive unlimited federal bankruptcy protection.

I'm referring to state creditor protection outside of bankruptcy.