403b Rollover Question
My wife is retiring from teaching and has a sizable 403b. She’d like to roll it over to a Roth IRA. Does the rollover have to take place in one transaction or can we spread it out over a number of years to reduce the tax consequences?
Thank you,
-Bob Berger
San Antonio
Permalink Submitted by Alan - IRA critic on Fri, 2018-06-01 18:23
Unless your tax situation is unique, a rollover of a large amount in a single year will increase the marginal rate and likely cause the tax rate paid to be higher than it otherwise would be if the conversions are spread over a period of years. The plan may not allow partial Roth rollovers, and if so the entire plan should be directly rolled over to a rollover IRA from which the controlled conversions can be done when desired. An IRA rollover will usually result in investment options having lower expenses than the 403b has. You need to be very careful not to roll too much to a Roth in a single year because starting this year Roth conversions can no longer be recharacterized (reversed). Therefore some tax planning is required since you said the 403b balance is sizeable.