A Few Things To Consider
What's the best choice; a 403b rollover to IRA or a 403b rollover to Roth IRA? There are a number of considerations. Either could be more advantageous, depending on your current income status and your predictions for the future.
Make A Direct Roll-Over Transfer
The usual reason for making a 403b rollover to IRA plans of any type is a job change, since these tax-sheltered annuity plans are only offered to employees of public schools, tax-exempt organizations and some ministers. My first bit of advice is to make a "direct roll-over or transfer", rather than a regular roll-over, which makes you the middle man.
Make Your Deposit With in 60 Days
Direct rollovers and transfers are made directly from the plan to the new custodial company. In a regular roll-over, a check is made out to you and you must be sure to deposit it into your new account within 60 days. Otherwise, some or all of the account value will be considered as part of your taxable income for the year.
What Is Taxable
Now, when it comes to a 403b rollover to Roth IRA, the account value WILL be taxed as regular income, unless you made after-tax contributions into the account. If you made both pre-tax and after-tax contributions, only a portion of the fund will be taxable.
If most or all of your contributions were after-tax, then the logical choice is a 403b rollover to Roth IRA. That way, you will never pay taxes on distributions. If most or all of your contributions were "pre-tax", then the logical choice is a 403b rollover to IRA accounts of the traditional type.
Higher Tax Bracket In The Future
Of course, if you believe that your future income tax bracket will be higher than it is today, then you might consider a 403b rollover to Roth IRA, regardless of whether your contributions were taxed or not. Even if you are in the same tax bracket after retirement, your contributions are equivalent to a higher contribution in a standard account.
Lower Tax Bracket In Future
If, on the other hand, you believe that your income and/or your tax bracket will be lower after retirement, then you would benefit more form a 403b rollover to IRA, since you would get a yearly tax deduction for all additional contributions that you make to the account. Your current age is another consideration, as is the possibility that you might not live to retire, so you would never see the benefit.
Advantage Of A Self Directed Account
But, let's look at another scenario. Suppose you decide to open a self-directed account and you make some highly profitable real estate deals. It is possible to accumulate millions, in a relatively short period of time and unless you are planning to leave a large inheritance to the kids, you will probably want to spend some of that money during your retirement years.
Never Pay Taxes On These Earnings
Regardless of how much the account earns or how much you take out, once you pass the age of 59 ½, you will never pay taxes on any of those earnings. Whether you decide on a 403b rollover to Roth IRA or a 403b rollover to IRA, you should learn how you can earn a higher return on your investments, if you want to retire in style.
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