Old 403b into Roth

[ACN]

My wife and I have decided that it's in our best interest (financially) to convert her old 403b into a Roth ($27k balance).  This will be our last year where our income is in the 25 or maybe 28% with the conversion as it is my last year of training.  I was hoping to get some verification if the following steps are appropriate.

1. Current asset allocation is 100% in a Vanguard Institutional Index Fund at Voya (Old 403b)
   
   
   
   • Should I sell the entire fund into a Money Market before the transfer or just leave it as is?
   
   
   
   


2. Request custodial transfer from Voya to Vanguard.


3. Once $$ is settled into Vanguard MM fund, do I convert to Roth and then buy an index fund OR do I buy an index fund then convert to Roth?
   
   
   
   • If I don't convert it to a MM prior to transfer, will it settle into a MM fund or back into the same fund as we had at Voya?
   
   
   
   


4. Profit???

Am I missing or overlooking anything?  Please let me know!  Thanks!

[Michael Solari]

Instead of taking the tax hit you may want to just keep it there, especially since you're invested in a low-cost Vanguard fund.

But if you want to convert it, Voya will most likely want to issue a check for the rollover. So, you'll liquidate it there and have the check be issued to your IRA, i.e. "Vanguard FBO ACN IRA." The money will go into a money market fund (maybe VMMXX?) and then you can convert thereafter. The entire conversion would be taxable unless somehow there's after-tax money. If that's the case then make sure you get two checks.

[jfoxcpacfp]

You should be able to roll directly into a Roth. Check with your 403b custodian. Check to see if you can "transfer in kind", also. If so, this will be a direct trustee-to-trustee transfer from the Voya 403b to the Vanguard Roth. You'll owe tax on the full amount of the transfer unless you have any "basis" (nondeducted contributions) in your 403b.