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RETIREMENT
JUNE 1, 2018

Should I Roll Over My 403(b) Account into an IRA?

Answered by
Bill Hunter
Head of Strategy, Retirement Client Experience
When you leave a job where you have an employer-sponsored retirement account like a 401(k) or 403(b) account, you have the option of rolling those retirement assets into an IRA. And there are several reasons to consider moving your funds into an IRA:
"In a rollover IRA, you have more control over your investments and a wider range of investments to choose from."
— Bill Hunter, director of Personal Retirement Strategies and Solutions at Bank of America Merrill Lynch
  • Many people change jobs multiple times over their careers, which can result in a trail of retirement accounts. Consolidating your accounts makes it easier to manage and monitor your progress.
  • When you roll over the assets in your 401(k) or 403(b) account into an IRA, your potential tax advantages and growth potential are preserved.
  • An IRA may carry lower fees than your employer-sponsored 401(k) or 403(b) account.
  • Employer-sponsored plans often offer fewer investment options than the number of options made available under an IRA.
"In a rollover IRA, you may have more control over your investments and a wider range of investments to choose from," says Bill Hunter, head of strategy, Retirement Client Experience at Bank of America Merrill Lynch.
There's one potential wrinkle, though: If you roll assets from your workplace plan into a traditional IRA, you'll need to begin taking required minimum distributions (RMDs) when you reach the age of 70½, even if you're still working. Many employer-sponsored plans, such as your 401(k) or 403(b) account, don't require RMDs, as long as you're working, with some exceptions. You could also choose to roll your assets into a Roth IRA, which doesn't require RMDs, either.
A Rollover IRA isn't right for everybody. Consider all of your choices in consultation with your legal and/or tax advisors and decide whether rolling over may be the right choice for you.Footnote 1

Do I have to pay taxes when I roll over my funds?

To avoid mandatory federal income tax withholding on the distribution, be sure to have your former employer send the money directly to the IRA custodian. If you don't, your former employer must withhold 20% for federal income taxes. When the money is sent directly to you, you have 60 days to put the funds into an IRA — including the 20% that was withheld, which must be made up with other assets — or it will count as a distribution and could be subject to federal income taxes and a 10% additional federal tax, if you're under age 59½ and no exception applies.

What if I decided not to roll over my 403(b) or 401(k) account?

Other choices for your employer-sponsored retirement accounts include:
  • leaving your money in the existing plan
  • transferring it to your new employer's plan
  • cashing out (which may trigger taxes and the early withdrawal additional 10% tax, unless an exception applies, as well as eliminating the potential for your investment to grow)
Ready to get started?
Footnote 1 https://www.merrilledge.com/retirement/should-i-roll-over-my-401k

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
You have choices about what to do with your employer-sponsored retirement plan accounts. Depending on your financial circumstances, needs and goals, you may choose to roll over to an IRA or convert to a Roth IRA, roll over an employer-sponsored plan account from your old job to your new employer, take a distribution, or leave the account where it is. Each choice may offer different investment options and services, fees and expenses, withdrawal options, required minimum distributions, tax treatment, and different types of protection from creditors and legal judgments. These are complex choices and should be considered with care. Visit http://www.merrilledge.com/retirement/rollover-ira or call a Merrill Edge® rollover specialist at 888.637.3343 for more information about your choices.
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