401k/403b Rollovers: Should You Move Your Old Retirement Plan To Your New Employer?

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Let’s continue with the 401k/403b Rollover discussion. Previously, I explored some possible reasons to keep your old employer’s plan. The next option to consider (if only briefly) is to transfer your 401k/403b assets into your new employer’s retirement plan. You can only transfer after-tax contributions between the same type of account (401k » 401k, or 403b » 403b), but more common pre-tax contributions should be able to be transferred between different types as long as the new plan allows rollovers.

The reasons you might want to do an employer-to-employer transfer are very similar to before:

Special investment options
Maybe your new employer plan has some desirable options that aren’t available to a retail IRA investor. The average 401k has something like 7 mutual fund choices though, so this is probably unlikely. Ask your new HR department for details.

Lower minimum balances or fees
If you have a small balance and figure you might as well cash it out as you don’t meet other account minimums, don’t! Your new employer will probably have no minimum requirements and you can continue to build on what you have already contributed.

Ability to take out loans
Your new 401(k) may allow you to take out loans against your savings, which you can’t do with an IRA. In addition, if you already have a loan from your old 401(k), your new one may allow you transfer over that loan. Otherwise, most plans make you pay back the balance immediately or risk having it penalized as an unqualified withdrawal.

Still not sure? Another alternative is to roll your plan into a Rollover IRA, keeping it separate and not merging it with any other IRAs, and then see how you like your new employer’s plan. If somehow you do, then you can transfer the Rollover IRA assets into your new plan.

References: SmartMoney, American Funds

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  1. “Your new 401(k) may allow you to take out loans against your savings, which you can?t do with an IRA.”

    Well, not with a Traditional IRA.

  2. You can’t take loans out of Roth IRAs either. You can withdraw your initial contributions without penalty, but that’s not a loan as every year you still are subject to the same contribution limits. For example, you can’t take out $4,000 this year and just put in $8,000 next year.

  3. Wait a minute! I can’t transfer my former employer’s 403(b) into my new employer’s 401(k)!!?? Dang!! I didn’t even think to ask if this was possible!! On the direct rollover form I mailed yesterday to my former employer’s plan, there was a box to check which type of plan I wanted the money moved to. One of the options was 401(k) and so I checked it. Because that’s what the new plan is obviously. But there was now mention on the form about not being able to move 403(b) money into a 401(k). Are you sure about that Jon?

    • Scott Jordan says:

      Yes, you can do a direct rollover from a previous employer’s 403b into a new employer’s 401k. I just completed this from a TIAA-Cref 403b to a Nationwide 401k. In both plans my contributions were pre-tax contributions. There was no problem.

  4. Ted Valentine says:

    Why would you want to take a loan on your 401(k)? Especially you, who lives on way less than you make and has a lot of savings.

  5. This is an advice article. Jonathan is simply telling everyone what options are available.

  6. Eric – Sorry to alarm you, that was a typo. After-tax contributions appear to only be able to moved between similar plans. See the American Funds link above for more information.

    Can I move my assets from one type of plan to another, for example, from a 403(b) to a 401(k)?

    You can generally move the vested portion of your account from one type of plan to another as long as the new plan accepts rollovers.

    Your after-tax contributions are only transferable between similar plans (for example, from a 403(b) plan to 403(b) plan), and you must move your money directly between plans.

    Check your new plan to see if it accepts rollovers of Roth assets and/or after-tax contributions.

  7. Whew! Thanks for the clarification. And enough with your silly typos!! 😉

  8. One of the features of 403(b) is that there is no age limit to begin withdrawals – at least not the State Government plan that I had previously. One of the reasons that I didn’t roll that into an IRA account.

  9. There is an age limit for the University of California 403b plan, 59.5 is when you can start withdrawing without penalty and you must take required minimum distributions by 70.5 I *thought* this was part of the goverment laws governing 403b plans. One thing the UC has, which is very interesting is a 457b savings plan in addition to the 403b plan. According to the litterature, it looks like one can put in an additional pre-tax $15500 in this plan in addition to the $15500 limit in the 403b plan. So, UC employees and faculty can save a whopping $31000 pretax. Wow!

  10. Jeff Lanning says:

    My wife has a 403b plan that she no longer puts money into and we would like to transfer that into my 401k plan that I put money into. Is this allowed?

  11. I have an old 401(k)plan from that I am no longer contributing to and no longer employed there; the funds offered aren’t very good therefore the interest I have earned over the past 5 years is not much at all; I am currently contributing to a 403(b) plan now and have been for 3 1/2 years; can I rollover my 401(k) funds into my 403(b) plan if the 403(b) plan allows rolllovers?

  12. I am astounded by the inaccuracies in this blog. Please do yourself A favor and seek a professional financial advisor. The biggest mistake on here is the misinterpretation of the 402g limits not to mention the “typo” which is Jon’s way of avoiding the fact that he blogged inaccurate information. There are professionals out there for a reason, take advantage of them.

  13. @Sam – I don’t deny there may be errors, especially as this was written 5 years ago, but if you pointed out the errors and provided the correct information, that would actually be helpful as opposed to “you’re wrong, i’m right, see a professional to see why”.

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