403(b) Transfer | What is it and how it works? (2023)

What is a 403(b) rollover?

If you have one403(b) retirement planthrough your employer, and you leave your job or retire, you have the option of transferring your savings into an Individual Retirement Account (IRA). This is called a 403(b) rollover.

What is a 403(b) plan?

A 403(b) plan is similar to a 401(k). But while an employer at a private, for-profit company typically offers a 401(k) plan, public schools and certain charities offer a 403(b) plan to their employees. A 403(b) plan allows employees to defer part of their paychecks into individual accounts, with no state or federal income tax on the money until it is withdrawn.

When It Makes Sense To Transfer Your 403(b) Into An IRA

There are several reasons why you might consider transferring your 403(b) to aIRA.The main reasons involve convenience and maximizing the performance of yourRetirementinvestments.

Top Reasons to Transfer a 403(b) to an IRA or 401(k)

Convenience about your retirement planning
Rolling multiple retirement accounts into a single IRA provides a single statement for all of your retirement savings. It allows you to monitor and manage your portfolio in one place instead of spreading it out across multiple plans from multiple previous employers.

Lower investment rates
IRA accounts tend to have lower investment fees than 401(k) or 403(b) plans. Fee structures differ between plans, so it's worth comparing overall costs between plans and considering long-term costs when deciding whether to turn your 403(b) into an IRA.

More investment options
Any IRA tends to offer more investment options. For example, 403(b) plans may not give you the option to buy individual stocks or put your money in a real estate investment trust (REIT).

How does a 403(b) rollover work?

There are two ways a 403(b) rollover can work: through direct or indirect rollovers.

Direct Transfers vs. tips

In a direct transfer, you tell the 403(b) plan administrator where you want the money to go. The trustee then transfers the money directly into your new IRA or other retirement account.

indirect transfer
With an indirect rollover, the 403(b) plan administrator sends money from your account. You then have 60 days to re-deposit the money into your new retirement account.

What must you do to cancel your 403(b)?

The first thing you need to do to roll your 403(b) is decide where you want to put your money.

Next, you'll need to decide whether you want to make a direct or indirect transfer. Direct rollovers tend to be the best option because you don't risk tax penalties. If you choose an indirect rollover, your plan will have to withhold 20% of your federal income tax savings upfront.(so you can claim the money when you file your tax return at the end of the year).

Once you've made your decision, simply authorize your plan administrator to make the transfer.

You may be asked to complete and sign a distribution request form. You may also need a letter from the plan administrator at work to confirm that your savings will be deposited into an eligible retirement account.

Typically, you can contact your employer's human resources department to make the arrangement. The plan administrator will do the rest.

(Video) 403b Retirement Plan Explained: Retirement for Teachers, Schools, Nurses, Hospitals and Non-Profits


What are the rules for transferring a 403(b)?

The plans you can roll your savings into depend on the type of 403(b) you have, whether traditional or Roth. A traditional 403(b) is pre-tax, which means the money you contribute to the plan isn't taxed until you start making withdrawals. Contributions to a Roth 403(b) are taxed when you make them, but your withdrawals are not subject to income tax.

You can only transfer a traditional 403(b) plan to a traditional IRA or other pre-tax retirement plan. And you can only transfer a Roth 403(b) to another Roth-style account.

Plans to which you can transfer your 403(b) to

If you change jobs, you can also transfer your 403(b) savings into other employer-sponsored retirement plans your new job may offer.

For example, if you take a new job at a traditional companyplano 401(k), you can transfer your old traditional 403(b) savings to the new 401(k). This applies to many different types of retirement plans.

Plans You Can and Cannot Transfer from a 403(b) Plan

plan type
Traditional 403(b)
Roth 403(b)
403(b) (before taxes, with a new employer)
Plan 457(b) (government withdrawal)
Designated Roth Account: 401(k), 403(b) or 457(b)
Eligible plan (before taxes)
IRA Roth
Simple IRAs
after two years
traditional IRA

Will you incur penalties for turning your 403(b) into an IRA?

You will incur penalties and pay income tax if you wait too long to roll an indirect roll.

(Video) How Does a 403(b) Work in Retirement?

Your 403(b) plan will also withhold 20% of your savings for federal income tax if you do an indirect rollover. This does not apply to direct transfers.

If you miss the 60-day deadline to transfer money to your new account with an indirect transfer, you'll also have to pay a 10% penalty if you're under 59 1/2.

The IRS may waive the 60-day period if the filing is delayed due to circumstances beyond its control.

Common questions

What is a 403(b) plan?

A 403(b) plan, also called a tax-protected annuity plan, is a type of retirement plan similar to a 401(k). While 401(k) plans are generally sponsored by employers in private for-profit companies, 403(b) plans are provided to certain public school employees, ministers, and employees of tax-exempt 501(c)(3) organizations.

Can I transfer my 403(b) into a Roth IRA?

That depends. You can if you have a Roth 403(b) plan. You cannot transfer a traditional or pre-tax 403(b) plan to a Roth IRA. Roth IRAs and Roth 403(b) plans tax your contributions to the account when you make them. Traditional IRAs and 403(b) plans are pre-tax, meaning your contributions are not taxed until you withdraw them. Simply put, you can move from one Roth account to another Roth account or from a traditional account to a traditional account. But normally you can't mix and match.

What should I do with my 403(b) after a job change?

After a job change, you may decide to keep your 403(b) account where it is with your former employer, transfer it to an eligible retirement account at your new employer, or transfer it to an IRA.

How long do you have to cancel a 403(b) from a previous employer?

If you choose to do an indirect rollover of a 403(b) plan, you have 60 days to complete the rollover. If you miss the deadline, you face a 10% fine and income tax on your savings.


(Video) What Are the Best Funds For Your 403(b) Plan?

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Last Modified:December 5, 2022


Written by

403(b) Transfer | What is it and how it works? (1)

Terry TurnerSenior Financial Writer and Financial Wellness Facilitator[email protected]

  • Member of the National Pension Institute
  • Emmy® Award Winner
  • Certified Financial Wellness Facilitator

see biography

Edited by

403(b) Transfer | What is it and how it works? (2)

lamia chowdhuryfinancial editor

see biography

(Video) Understanding a 403b Loan

Financially reviewed by

403(b) Transfer | What is it and how it works? (3)

Thomas J. Brock, CFA®, CPAspecialist collaborator

see biography

3 research papers cited

Annuity.org writers adhere to strict sourcing guidelines and use only reputable sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded non-profit organizations, government reports, court records, and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in oureditorial guidelines.

(Video) How Does A 403b Work

  1. US Internal Revenue Service (2022, February 18). IRC 403(b) Tax-protected annuity plans. obtained fromhttps://www.irs.gov/retirement-plans/irc-403b-tax-sheltered-annuity-plans
  2. US Internal Revenue Service (2022, June 16). Retirement Plan Reinvestments and IRA Distributions. obtained fromhttps://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions
  3. US Internal Revenue Service (North Dakota). Scroll chart. obtained fromhttps://www.irs.gov/pub/irs-tege/rollover_chart.pdf


How do I transfer my 403b to a new employer? ›

If you are no longer with the employer that sponsored your 403(b) plan, you can roll over your 403(b) balance into a 401(k) account with your new employer. If you have an IRA, you can also transfer your 403(b) funds into a traditional IRA to get access to a wider pool of investment options.

How does a 403 b rollover work? ›

A 403(b) Plan rollover is the transfer of funds from a 403(b) Plan in your name to an individual retirement account that you own, To roll over a 403(b) to an IRA you must transfer money from one retirement account to an individual retirement account.

How do I get my money from my 403b? ›

Standard 403(b) withdrawal

To access funds in your retirement account, you'll need to qualify through one of the following measures: Reach age 59 1/2. Have a severance from employment. Become disabled.

How does 403b payout work? ›

These retirement plans are funded with pretax dollars and the money inside grows on a tax-deferred basis. That just means you won't pay taxes on the money now, but you'll be taxed on the withdrawals you take out in retirement.

What happens to my 403b when I leave my job? ›

You may be able to leave your 403(b) with your old employer. Otherwise you can withdraw it, roll it into an IRA, or transfer it over to a new employer. What you do depends in part on whether you plan to continue to contribute to your 403(b) plan, or are getting ready to retire.

What should I do with 403b after leaving job? ›

The most common option for managing an old 403(b) is to roll the account into a Traditional IRA. A Traditional IRA is set up independently, and is not affiliated with your employer. Like a 403(b), the Traditional IRA delay taxes on your retirement savings so you won't owe any taxes upon rollover.

How much tax do you pay on 403b withdrawal? ›

Federal tax law requires that most distributions from qualified retirement plans that are not directly rolled over to an IRA or other qualified plan be subject to federal income tax withholding at the rate of 20%.

What is the difference between a 403 B rollover and transfer? ›

The difference is really the type of account being moved. In a Transfer you are usually moving an IRA to another IRA directly. In a Rollover you are usually moving an employer sponsored plan to an IRA, and this can be directly or indirect.

Can I move my 403b to cash? ›

You can cash your 403(b) out.

If you cash it out and you are under the age of 59.5, you're going to pay a 10 percent penalty on the balance in addition to income taxes.

Can I cancel my 403b and cash out? ›

A 403(b) plan, the employer-sponsored retirement plan available to employees at non-profit organizations and public schools, does provide the option of withdrawals before retirement. But there are—similar to other retirement plans—possible fees and taxes associated with withdrawing funds before retirement age.

What happens if I cash out my 403b? ›

If you take the money as a plan distribution before age 59½, you'll owe the IRS a 10% early withdrawal penalty. You'll also owe ordinary income tax in the year you receive the distribution.

What are the disadvantages of a 403b? ›

The Disadvantages of a 403(b)

Since the plan functions as a retirement savings vehicle, you could face additional expenses if you take withdrawals early. "If you distribute funds from a 403(b) account before age 59 1/2 your funds may be subject to taxes and early withdrawal penalties," Comella says.

At what age can you withdraw from 403b without penalty? ›

Current IRS regulations allow withdrawals of 403(b) monies, without penalties, when you: Reach age 59½, Retire or separate from service during the year in which you reach age 55 or later,***

How long do you have to keep money in a 403b? ›

Key Takeaways. A 403(b) plan doesn't require you to take distributions when you retire. You must start taking annual required minimum distributions when you turn 73 as of Jan. 1, 2023, or at 72 if you turned that age before that date.

Should I cash out my 403b to pay off debt? ›

While the credit card company charging 16% interest is annoying, taking money from your 403(b) or any other retirement account to get rid of the debt may negatively impact you financially. Even though you can take the money out without the 10% penalty, you would still have to pay taxes on the money.

DO 403b withdrawals affect Social Security? ›

He has asked whether pre-tax deferrals to his 403(b) plan will reduce earnings for purposes of the Social Security earnings test. Will they? A. Unfortunately, contributions to retirement plans and IRAs do not reduce earnings for purposes of reducing salary for Social Security purposes.

How can I avoid paying taxes on my 403b? ›

If you opt for a traditional 403(b) plan, you don't pay taxes on the money you pay until you begin making withdrawals after you retire.

Should I roll my 403b into an IRA? ›

If you have a traditional 401(k) or 403(b), you typically want to roll it over into a traditional IRA. If you have a Roth 401(k) or 403(b), you must roll it over into a Roth IRA. If you withdraw from a traditional 401(k) or 403(b) as a “non-rollover” before age 59 ½, you'll face a 10% penalty for an early withdrawal.

Is 403b better than 401k? ›

While 401(k) and 403(b) plans have the same general contribution limits, 403(b) accounts have an edge: Employees who have worked for a qualified organization for 15 years or more may be eligible to make additional contributions.

Do I have to report 403b withdrawal on taxes? ›

However, upon distribution from the account, all of your 403(b) funds become taxable. You must report every withdrawal to the IRS and pay ordinary income tax on the amount of the distribution.

Do you have to report 403b on taxes? ›

Generally, you don't report contributions to your 403(b) account (except Roth contributions) on your tax return. Your employer will report contributions on your 2022 Form W-2.

How much can I withdraw from 403b for home? ›

So, in a nutshell, the most you can borrow from a 403(b) plan to buy a home is $50,000. Your actual limit will depend on how much you have in your plan and how much of that is vested.

Can I transfer my 403b to an IRA? ›

If you have a Roth 401(k) or 403(b), you can roll over your money into a Roth IRA, tax-free. If you have a traditional 401(k) or 403(b), you can roll over your money into a Roth IRA.

Does a 403b transfer to a 401k? ›

Funds from a 403(b) can roll over into a 401(k) or a traditional IRA, among other accounts. For example, when rolling over a 403(b) into a traditional IRA, the funds are moved from the employer-sponsored 403(b) into a person's IRA retirement account, which is one that is not associated with an employer.

Can I take a lump sum from my 403b? ›

403(b) plans may provide employees with a choice on how benefits will be paid. For example, an employee can choose to have benefits paid in a lump sum. Certain distributions may be eligible for rolloverPDF to another plan or an IRA.

How much should I put in my 403b per month? ›

Explanation of Terms. Employee Basic: The amount you must contribute into your 403(b) plan — currently 5% of your annual salary — to be eligible for the university's matching contribution.

Can the IRS take my 403 B? ›

Yes, the IRS can seize your retirement accounts and/or garnish your pension payments and Social Security benefits for back taxes. Typically, the IRS tries to avoid seizing retirement accounts, but the agency will pursue this collection action as needed.

Can you retire at 55 with a 403b? ›

What Is the Rule of 55? Under the terms of this rule, you can withdraw funds from your current job's 401(k) or 403(b) plan with no 10% tax penalty if you leave that job in or after the year you turn 55.

Can my children inherit my 403b? ›

Only inherited 403(b) accounts can be rolled into an inherited IRA. A beneficiary inheriting a 403(b) account has several options including the inherited rollover option, cash-out distribution, or maintaining the funds within the plan based on the balance size and terms of the plan document.

How Long Does my employer have to deposit my 403 B contribution? ›

Department of Labor rules require that the employer deposit deferrals to the trust as soon as the employer can; however, in no event can the deposit be later than the 15th business day of the following month.

Can you rollover 403b at anytime? ›

An employer-sponsored plan, such as a 401(k) or 403(b), you can initiate a rollover—typically, when you change jobs or retire. When you roll over retirement plan assets, you're moving them from a group plan into an IRA (which generally offers greater investment flexibility).

Can I cash out my 403b if I get fired? ›

Your contributions to your 403(b) can't be taken away or forfeited. Contributions to your 403(b) made by your employer may be subject to vesting requirements. In this case, any money that isn't vested as of the date you were fired or laid off is no longer yours.

Should I transfer my 403b to an IRA? ›

If you have a traditional 401(k) or 403(b), you typically want to roll it over into a traditional IRA. If you have a Roth 401(k) or 403(b), you must roll it over into a Roth IRA. If you withdraw from a traditional 401(k) or 403(b) as a “non-rollover” before age 59 ½, you'll face a 10% penalty for an early withdrawal.

Can I take a lump-sum from my 403b? ›

403(b) plans may provide employees with a choice on how benefits will be paid. For example, an employee can choose to have benefits paid in a lump sum. Certain distributions may be eligible for rolloverPDF to another plan or an IRA.

At what age can you withdraw 403 B? ›

If you are 55 or older and lose your job or quit, you can withdraw money from your 401(k) or 403(b) without paying a tax penalty. If you retire before age 59 1/2, you have another option known as the Substantially Equal Periodic Payment (SEPP) exemption (IRS Section 72(t) distribution).


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