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Old 403b into Roth

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  • Old 403b into Roth

    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!

  • #2
    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.


    • #3
      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.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087