403b Rollover to IRA - Advantages and Disadvantages

If you need to transfer a 403b rollover to IRA of a traditional type, you have a number of options. There are advantages and disadvantages to each. First, let's look at a 403b rollover to Roth IRA.

Rolling over from an account that was funded with pre-tax or tax deductible funds to a Roth-type cause additional taxes for that year. But, beginning in 2006, contributions to a 403-b plan could be made "after-taxes", similar to the way that one funds a Roth account. If you have made after-tax contributions to your 403-b, that portion is not taxed as regular income for the year that you make the roll-over, but any contributions that were made before taxes, as well as earnings on them will be taxed as regular income for that year.

If you take a 403b rollover to IRA accounts of the traditional type, no taxes are incurred in the year that you take the roll-over, as long as you redeposit the fund within 60 days and you only take one roll-over within a 12 month period. Those are the rules regarding rollovers of any type.

If you do not want to incur additional taxes for the year, you can still take a partial 403b rollover to Roth IRA. Converting just enough of the fund to keep you within the same tax bracket and prevent lots of additional costs. This can be repeated over a period of several years, transferring funds from the tax-deferred account to the tax-free account, a little at a time.

If you are concerned that you might want to change custodians again, within a year's time, you can simply "transfer" the fund or take a "direct-rollover". The terms are sometimes used interchangeably, but transfers are not reported to the IRS and there are no frequency limitations.

Whether you take a 403b rollover to Roth IRA or a traditional account, you may want to consider self-directing, at this time. Self-directed investing allows for more options and typically higher returns, as well as ones that are safer than the volatile stock market.

If you do decide to make a 403b rollover to Roth IRA transaction, your returns will not be subject to capital gains or other annual taxes AND qualified distributions are never taxed. So, regardless of how high the account value becomes, it is all tax-free, as long as you follow the rules.

If you convert a 403b rollover to IRA accounts of the self-directed type, you can take advantage of unique options that are found in an underserved area of the real estate market. There are lots of different ways to earn money; you don't have to rely on stocks and bonds.

If you are at or near retirement age, you may still want to consider a 403b rollover to Roth IRA. Taxes might be more affordable right now, than they will be after you retire.

Before you make your 403b rollover to IRA, why not learn more about all of your investment options. This was just the tip of the iceberg.

Judy Pratt is focused on showing you how to successfully earn money for your future with real estate investing using honest and ethical turn-key methods while minimising any risk. To get your FREE ebook and find out more about socially counscious investing please go to http://www.boost-your-ira.com