Thread: 401k vs 403b

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  1. #1
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    401k vs 403b

    I am switching companies at the end of this month. I currently work for a "for profit" and will be going to a "non profit". I do not know much about the non profit 403b plan. The little that I have read on it, I think I will transfer my 401k to my roth IRA and manage the funds from my old 401k that way. What are your thoughts on this? Any tax advantages that I am missing? Is rolling a 401k into a roth IRA a bad idea?

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  3. Stocks/Investments Moderator boneil's Avatar
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    #2
    I don't think there is a difference between the 401 and 403, as it relates to the employee, only the employer and what they offer as far as investment options. I like the IRA because you have all the freedom to make your own choices but you don't get the employer contribution and the tax benefit. I would look at what the new plan offers for investment options.
    Knowledge is the Kryptonite of Liberalism

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    #3
    Is your current 401k a roth 401k?

  5. Member
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    #4
    No, currently it is a standard 401k. Like Boneil states, if I roll it into my roth IRA, I will have more control over it. I just wasn't sure about the 403b. Never heard of them until recently.

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    #5
    Your standard 401k are pre-tax contributions.

    Roth are after-tax contributions.

    If you roll-over anything to a Roth, I think you will have to pay taxes on everything you roll-over.

    I think it will be classified as income for the given year of the roll-over.

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    #6
    Most people would start by doing a Rollover IRA with the 403B funds. Many employers don't offer their employees but 10-12 mutual funds of different risks. They don't want you to start speculating on the highly risky investments and blow your retirement fund--50% of which was their investment in many cases. Moving the money into an IRA Rollover will give you 100% control, and you can move it into hundreds and hundreds of funds.

    Whether you move the $ into a Roth IRA is your decision. Of course you will have to pay income taxes when it's moved to the Roth IRA. Many will transfer just enough $ to keep them out a higher tax bracket. Then re-evaluate your next year's income and move more of the IRA Rollover to a Roth IRA if they're in a lower tax bracket.

    The big mistake so many of those in my office did with their 401K's is invest in ultra conservative funds--and not go after the funds with the highest ROE--and risk. My wife's 401K's were always in very conservative but good funds which allowed me to be a little more risky. And it paid off in the long run.

    ETF's are now in fashion, and they're more like a very low cost index funds of index funds. Some people will get into 10-15 different style of ETF's due to the extremely low service fees.

    I always go on fishing forums to ask about financial information. We like to invest our money in assets like bass boats and pickup trucks--that are not over priced and don't depreciate. And we like to finance them on 120 months so we can play the stock market with the money we're saving on making tiny principal payments.
    Last edited by Bamaman; 01-04-2017 at 01:18 AM.

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    #7
    Like was mentioned earlier a traditional 401k cannot be rolled into a Roth without paying taxes. Also, employer sponsored plans are notoriously known for being an expensive alternative. Therefore, I would simply roll it into a traditional IRA somewhere like Fidelity or Vanguard and pick a solid allocation. If you do not feel comfortable doing that then go get some professional help form a fee based advisor.

    How much money are we talking about here?