Can You Roll Over a 403(b) to an IRA If You’re No Longer Employed?

If you are no longer working with the employer that established your 403(b) account, you can roll your 403(b) balance into a traditional individual retirement account (IRA).

How to Roll Over Your Account

Generally, only a signed contribution form is required by the individual retirement account (IRA) custodian/trustee to deposit the funds into an IRA. However, you should consult with your IRA custodian about their policies and procedures to prevent any unnecessary delays.

You should also consult with your 403(b) plan administrator/carrier to ensure the proper paperwork is completed. You may need to complete a distribution request form in order to have the assets distributed. The administrator may also require an acceptance letter from your IRA custodian. The letter serves as a confirmation that the assets will be deposited in an eligible retirement plan.

If you are no longer working with the employer that established your 403(b) account, you can roll your 403(b) balance into an individual retirement account (IRA). You can also roll over a 403(b) plan if you leave a job and the new employer offers a 401(k) instead of a 403(b).

Rolling Over a 403(b)

Generally, only a signed contribution form is required by the IRA custodian or trustee to deposit the funds into an IRA. However, you should consult with your IRA custodian about their policies and procedures to prevent any unnecessary delays.

You should also consult with your 403(b) plan administrator or carrier to ensure the proper paperwork is completed. You may need to complete a distribution request form in order to have the assets distributed. The administrator may also require an acceptance letter from your IRA custodian. The letter serves as a confirmation that the assets will be deposited in an eligible retirement plan.

Finally, make sure the transaction is processed as a “direct rollover.” This means that any funds distributed are made payable to your IRA custodian and are sent directly to them. If the funds are made payable to you, the 403(b) administrator is generally required to withhold at least 20% of the total amount for federal taxes.

How a 403(b) Works 

A 403(b) plan is a retirement account for employees of public schools and tax-exempt organizations. The 403(b) plan is similar to a 401(k). Contribution limits for 2021 for 403(b) plans is $19,500 ($20,500 for 2022).

The catch-up contribution for those age 50 and older is $6,500 for 2021 and 2022. Like a 401(k), a 403(b) can also have a Roth option, and individuals may have access to both a 401(k) and a 403(b) plan, although this is rare.

Notably, 403(b) plans may also offer matching contributions. These plans also tend to vest quicker than 401(k) funds. In certain cases, 403(b) plan participants can make additional catch-up contributions if they’ve worked with nonprofits or government agencies for more than 15 years.

In terms of withdrawals, fund withdrawals are subject to a 10% penalty if taken before age 59½. The penalty can be avoided if the individual leaves the employer at age 55 or older.

Some Downsides of 403(b) Accounts

One of the key reasons for rolling over a 403(b) balance into an IRA is to get more investment choices. Notably, 403(b) plans have limited investment options when compared to other retirement plans, such as 401(k)s. Many popular investments, such as individual stocks and real estate investment trusts (REITs), are not allowed in 403(b) accounts. 

Notably, 403(b) accounts allow mutual fund and variable annuity contracts, whereas 401(k) accounts offer greater choices as they’re administered by mutual fund companies.