What to do with previous job 403b

[Nathan R Jessup]

Hello

 

I have a 403b from previous employment worth about 20k.  I am not eligible for new employer 401 k until next year January 1st.

Should I transfer the 403b into a traditional IRA on my own.  Will this affect my ability to do a backdoor Roth IRA this year?

 

Thanks

[actuaryonfire]

403b 's usually have horrendously high ongoing fees and so getting out of it and into a traditional IRA would usually be the best course. But be careful of any exit fees or if you have inadvertently invested in some kind of deferred variable annuity thing - these might skew the decision.

Not sure about the backdoor Roth question, but I paid $5,500 of after-tax money and converted to Roth. So if you are planning what I described, then I probably not. (But please check, as not my sweet-spot)

 

[jfoxcpacfp]

Hi, Nathan,

You might want to change your screen name, first of all. That gives you the ability to post anonymously in case some of your colleagues happen to be online here  

You have a few options:

• Go ahead and transfer the 403b into a rollover IRA, contribute to the nondeductible IRA but don't convert to a Roth in the year 2017. Then roll your 403b into your 401k sometime after December 2017 and do the backdoor conversion.


• Leave the 403b alone until you qualify for the 401k then roll directly into your new job's 401k. You can do the full backdoor Roth conversion in 2017 if you go that route.

Be sure your new 401k accepts rollovers before you proceed with the above. Not all plans do.

• Of course, my top preference would be for you to find some IC opportunities and set up a SOLO-401k, then roll your 403b into it. That way, you keep control of your money.

Explaining Backdoor Roth IRAs

[Peds]

Nathan R Jessup wrote:

Hello

 

I have a 403b from previous employment worth about 20k.  I am not eligible for new employer 401 k until next year January 1st.

Should I transfer the 403b into a traditional IRA on my own.  Will this affect my ability to do a backdoor Roth IRA this year?

 

Thanks

Click to expand...

1) find out if your new 401k accepts roll overs. if yes, transfer in next year. not a big deal.

2) do not move to tIRA. yes it will affect your ability to do a backdoor rIRA if you cannot move it out.

[Craigy]

Could Nathan simply dump all $20k into an IRA, make his $5,500 nondeductible IRA contribution, and then convert the whole $25,500 into Roth?  Obviously it would bump up the taxable income this year pretty substantially.

Never really thought about this... feel like I'm missing something obvious, besides the income tax hit.

[Peds]

yes the income hit.

[Faithful Steward]

jfoxcpacfp wrote:

You might want to change your screen name, first of all. That gives you the ability to post anonymously in case some of your colleagues happen to be online here

Click to expand...

Johanna, I think his screen name refers to the Col. Nathan R. Jessup character from A Few Good Men. Remember, "YOU CAN'T HANDLE THE TRUTH!"

[jfoxcpacfp]

Craigy wrote:

Could Nathan simply dump all $20k into an IRA, make his $5,500 nondeductible IRA contribution, and then convert the whole $25,500 into Roth?  Obviously it would bump up the taxable income this year pretty substantially.

Never really thought about this… or feel like I’m missing something obvious, besides the income tax hit.

Click to expand...

Converting to a Roth is always an option, it's just that most folks don't want to take the tax hit. If this is his first year as an attending, in fact, it would probably be the best time to do that as last year in a lower bracket for awhile.

[jfoxcpacfp]

Faithful Steward wrote:

jfoxcpacfp wrote:

You might want to change your screen name, first of all. That gives you the ability to post anonymously in case some of your colleagues happen to be online here

Click to expand…

Johanna, I think his screen name refers to the Col. Nathan R. Jessup character from A Few Good Men. Remember, “YOU CAN’T HANDLE THE TRUTH!”

Click to expand...

LOL, leave it to me to not connect the dots.

[Craigy]

jfoxcpacfp wrote:

Faithful Steward wrote:

jfoxcpacfp wrote:

You might want to change your screen name, first of all. That gives you the ability to post anonymously in case some of your colleagues happen to be online here 

Click to expand…

Johanna, I think his screen name refers to the Col. Nathan R. Jessup character from A Few Good Men. Remember, “YOU CAN’T HANDLE THE TRUTH!”

Click to expand…

LOL, leave it to me to not connect the dots.

Click to expand...

I had no idea either.   :|    :lol: