Moving money from a 403(b) plan to a traditional IRA allows you to maintain the tax-sheltered growth of your retirement savings and also open up new investment options. With a 403(b) plan, you're limited to fixed and variable annuities, mutual funds and church plans. With an IRA, you can invest in just about anything as long as it's not a collectible like rugs or art, and as long as you're not personally benefiting from it, like a vacation home that you use. You can only roll over your 403(b) plan to an IRA after you've left the job, however (plus, you must be under 59 1/2 years old).
Items you will need
- IRS Form 1040 or 1040A
Request a distribution from your 403(b) plan with a 403(b) plan withdrawal request form. You'll need to provide your name, account information and the amount you want to take out.
Deposit the amount of your withdrawal in your IRA before 60 days pass to complete the rollover. Your 403(b) plan withdrawal will have 20 percent withheld for federal income taxes, so you must make up that money from another source, such as your checking account. For example, say you want to roll over $10,000. When you take a $10,000 distribution, you receive $8,000, and $2,000 is withheld for federal income taxes. If you only redeposit the $8,000, the IRS treats you as if you withdrew $2,000.
Report the rollover on your income taxes. The amount of the distribution appears as a nontaxable pension and annuity distribution on line 16a of Form 1040 or line 12a of Form 1040A. As long as you complete the rollover, report $0 on line 16b of Form 1040 or line 12b of Form 1040A and "rollover" next to the line.
- Another option is a direct transfer from your 403(b) plan to your IRA where the money moves straight from your 403(b) plan to your IRA. There's no tax withholding, and you don't have to worry about the 60-day limit or reporting the transfer on your taxes.
- Internal Revenue Service: Like Share Print Retirement Plans FAQs regarding 403(b) Tax-Sheltered Annuity Plans
- Internal Revenue Service: Topic 413 - Rollovers from Retirement Plans
- Internal Revenue Service: Form 1040 Instructions
- Internal Revenue Service: Form 1040A Instructions
- Internal Revenue Service: Publication 590 -- Individual Retirement Arrangements (IRAs)