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If you work for a school, hospital, church, or non-profit organization, chances are you’ve heard of a 403(b) plan. It’s similar to a 401(k) but designed for employees of tax-exempt organizations. Your contributions go in pre-tax (or sometimes after-tax with a Roth option), and your money grows tax-deferred until retirement.
A 403(b) can be a great way to save for retirement—but did you know that rolling it over into another retirement account might give you even more benefits? Let’s break it down.
What is a 403(b)?A 403(b) is a retirement savings plan that allows you to set aside part of your paycheck, reduce your taxable income today, and build a nest egg for tomorrow. Some employers even add matching contributions. However, many 403(b) plans come with limited investment options and higher fees, which can hold back your long-term growth.
Why Consider a Rollover?When you retire or change jobs, you’ll often have the choice to roll your 403(b) into another retirement plan, like an IRA, a new employer’s 401(k), or even an annuity. Here are the main advantages of making the switch:
1. More Investment ChoicesMost 403(b) plans only offer a narrow selection of funds. An IRA opens the door to stocks, bonds, ETFs, real estate funds, and more, so you can tailor your portfolio to your needs.
2. Lower Fees & Greater ControlHigh fees can eat away at your retirement savings over time. Rolling over into a better retirement account often gives you access to lower-cost investments and puts you in the driver’s seat.
3. Easier to Manage
If you’ve worked for multiple employers, you might have several retirement accounts scattered around. Consolidating them into one plan makes life simpler and helps you stay organized.
4. Flexible Withdrawal OptionsAn IRA typically offers more flexible withdrawal strategies compared to a 403(b). That flexibility can be a big advantage when planning retirement income.
5. Smarter Estate PlanningIRAs allow more flexibility with beneficiary designations, helping you pass on wealth in a way that fits your family’s needs.
6. Roth Conversion OpportunitiesRolling over may also allow you to convert funds into a Roth IRA, which grows tax-free and can help reduce your tax burden in retirement.
The Bottom LineA 403(b) is a valuable savings tool, but it’s often just the first step. Rolling over your account into a better retirement plan can lower fees, expand your investment options, simplify your finances, and give you more control over your retirement future.
At the end of the day, the best plan is the one that fits your unique goals, needs, and timeline. If you’re considering a rollover, it’s worth sitting down with a licensed professional who can help you explore your options.