Research types of rollovers

• 1). Remember the 60-day rule. This is one of the most important things to understand about a rollover and may influence your decisions. The rollover needs to be completed by day 60 (calendar days--holidays and weekends count) after the distribution or you risk a large tax penalty by the IRS. (Note: there are hardship cases that extend the 60-day rule, but these must be approved by the IRS.)
  
  
• 2). Understand direct rollovers. These involve, with your approval, the transfer of funds directly from your current 403b custodian to your new IRA custodian. The direct transfer does not require any tax withholding and should be completed in much fewer than 60 days. This is also referred to as a trustee-to-trustee transfer.
  
  
• 3). Understand indirect rollovers. These involve a distribution directly to you, which you then transfer to the new custodian. Your current custodian deducts 20 percent withholding taxes from your 403b balance before cashing out your account and sending you a check for the balance. You are then required to send the check to your new financial institution within the 60 calendar days or risk additional tax penalties.
  
  
• 4). Understand rollovers due to divorce, inheritance or death. These types of rollovers involve different tax implications and can be quite complicated. Consulting a professional tax adviser in these cases is advised.
  
  
• 5). Complete a 1099-R form. The rollover distribution will be reported to the IRS by your current custodian. Depending on the rollover type, this not necessarily a taxable distribution, but you will receive a Form 1099-R to report and include with your taxes.
  
  

Determine your type of IRA: Traditional, SEP or Roth

• 1). Traditional IRA: an IRA that grows, tax-deferred. You are eligible to take withdrawals when you reach age 59 1/2, and you must begin taking withdrawals when you reach age 70 1/2. Withdrawals are taxed.
  
  
• 2). Roth IRA: a post-tax IRA that earns taxable interest and dividends. You are eligible to take withdrawals when you reach age 59 1/2, and you must begin taking withdrawals when you reach age 70 1/2. Withdrawals are not taxed. This is a relatively new rollover option; previously you would need to roll over into a traditional IRA and convert to a Roth. However, there are some tax implications and income thresholds (modified AGI is less than $100,000).
  
  
• 3). Rollover IRA: a traditional IRA set up for the purpose of the rollover. You are eligible to take withdrawals when you reach age 59 1/2, and you must begin taking withdrawals when you reach age 70 1/2. Withdrawals are taxed.
  
  
• 4). SEP-IRA: a simplified employee pension (SEP) is a tax-deferred IRA designed for self-employed persons, sole proprietors, and independent contractors as well as businesses. A 403b can be rolled over into a SEP, although this is probably less likely. You are eligible to take withdrawals when you reach age 59 1/2, and you must begin taking withdrawals when you reach age 70 1/2. Withdrawals are taxed.
  
  
• 5). SIMPLE IRA: the only type of IRA that cannot be used for a 403b rollover. The savings incentive match plan for employees (SIMPLE) IRA is a tax-deferred IRA for businesses with fewer than 100 employees, although this is probably less likely. You are eligible to take withdrawals when you reach age 59 1/2, and you must begin taking withdrawals when you reach age 70 1/2. Withdrawals are taxed.
  
  

Find a Trustee or Custodian for Your New IRA

• 1). Consider the company managing your current 403b (referred to as a custodian or trustee). If you are satisfied with its service, contact their customer service department and ask if they could be the custodian of your new IRA (not all companies will manage individual accounts).
  
  
• 2). If you decide to change custodians, think about your existing financial relationships. Many types of companies can manage IRAs, including banks, credit unions, mutual fund companies, insurance companies and brokerages. You may already have a good working relationship with a company that could handle the IRA rollover.
  
  
• 3). Talk to family and friends who have individual retirement accounts. Ask what company is the custodian for their accounts, and you might get a recommendation.
  
  
• 4). Review companies' websites to assist in your custodian selection process. Be sure to look at administrative fees, account management fees, fees to open your account or minimum opening balances.
  
  
• 5). Review third-party rankings of your possible custodians. Bankrate.com, for example, has ratings of credit unions and banks.
  
  

Open Your New Account and Process Your Rollover

• 1). Once you decide on a trustee, contact the company to set up a new account. Explain that you will be rolling over a 403b plan to an IRA. Specify the type of IRA you have selected.
  
  
• 2). Follow the company's process for opening an account, which will likely include some paperwork. Some companies may ask for your signature to be guaranteed by a notary (many banks, law offices and town municipal offices have notaries who would watch you sign the paperwork, ask for your identification and then certify that they believed this to be your signature).
  
  
• 3). As part of the account application, you may need to select an account type such as a CD, a mutual fund or a money market fund for the rollover to be deposited. Research the choices on the company's website and through a third-party review site such as Morningstar.
  
  
• 4). Designate a beneficiary for your new account, who will inherit the funds upon your death. You can always do this after your account has been established, but it is easy to forget. To designate a beneficiary, you will need that individual's social security number and sometimes his/her address.
  
  
• 5). If you have chosen to change trustees/custodians, contact the company currently managing your 403b. Explain that you are rolling over the 403b to a new custodian. Ask what information they need to authorize the rollover and complete as required.