Saving for Retirement

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Maybe it's time for a 403(b)(7) account rollover

January 13, 2017

If you're holding on to an old 403(b)(7) account with a former employer, you may not be sure what to do with it. Because your workplace savings plan assets often make up a significant portion of your retirement savings, it's important to look into your options to ensure you're getting the most from your money.

You generally have four options:

  • Leave the assets where they are. You can keep your account in your former employer's plan as long as the balance stays above $5,000.
  • Roll over the assets to a traditional or Roth IRA.
  • Transfer the assets to your new employer's plan, if allowed.
  • Cash out or withdraw the assets. This should usually be a last resort because distributions from a tax-deferred plan are generally subject to both ordinary income taxes if taken before age 59½ plus a 10% early withdrawal penalty, with few exceptions.

For certain investors, the best choice may be to move the assets into a traditional IRA or a Roth IRA. There are generally no fees or tax consequences involved when rolling over your assets* and you could gain greater investing flexibility. Check out the information below on rolling over a 403(b)(7) account with a former employer to a Vanguard IRA®.

Select from a wide variety of investments

With a Vanguard IRA, you can select from Vanguard mutual funds and exchange-traded funds (ETFs), as well as certificates of deposit (CDs), individual stocks and bonds, and mutual funds and ETFs from other fund companies.**

Of course, if you want to keep the same Vanguard mutual funds you hold in your 403(b)(7) plan account, you can do that too. And if you're not sure how to narrow your fund choices, we can help.

Benefit from our lower costs and keep more of your savings

Depending on your balance, rolling over your assets to a Vanguard IRA could make you eligible for Admiral™ Shares, a share class of Vanguard funds with expense ratios that are 16% lower on average than our standard low-cost Investor Shares. Lower expense ratios mean you can keep more of your savings for your retirement (and potentially have more income during retirement).

Take advantage of extra levels of service and advice

You may qualify for increasing levels of personal assistance, cost savings, guidance, and advice through our Voyager Services®, Voyager Select Services®, or Flagship Services®. You'll get discounts on advice offerings, benefit from reduced fees, and enjoy direct access to Vanguard investment professionals who can help you reach your goals.

You'll also have access to Vanguard Personal Advisor Services®, which offers the personal attention of a financial advisor combined with the latest investment technology—all at a low cost. You can be assured we'll work in your best interests because our advisors don't get paid commissions for selling you investment products or services.

Eliminate 403(b)(7) plan account service fees

There is a $15 annual account service fee for each mutual fund held in a Vanguard 403(b)(7) plan. (This fee is waived for our Voyager, Voyager Select, Flagship, and Flagship Select clients.) Your plan administrator may also charge fees for services that no longer benefit you as a former employee.

By rolling over your account to a Vanguard IRA, you'll eliminate any fees charged by your plan administrator. And if you qualify for one of our extra levels of service mentioned above or you sign up for e-delivery of your account statements and other important information, you'll avoid our account service fee as well.

Get easier access to your money

Over time, employers may change policies, or even relocate, making the procedures for taking distributions from your old 403(b)(7) plan less clear. With a Vanguard IRA, you can easily access your money anytime you need to.

Manage your account with ease

If you've changed jobs more than once and left money in each former employer's plan, it may be challenging for you to monitor your investments in multiple retirement accounts. If you haven't looked at these accounts recently, you may not have the most current information on how your accounts are invested. For example, you may find that you're duplicating investments or have a higher overall risk exposure than you'd like.

Consolidating your 403(b)(7) balances into one IRA can help make it easier to keep track of how much you've saved for retirement—and make it simpler to withdraw money in retirement.

Rolling over your 403(b)(7) account to a Vanguard IRA

At Vanguard, rollovers are pretty straightforward. We've walked thousands of clients through the process, and we can do the same for you. Rollovers typically take two to three weeks to complete, but you'll only spend a few minutes getting the process started.

Roll over your 403(b)(7) account

*If you roll over the assets to a Roth IRA, you may have tax consequences. Be sure to check with a tax advisor to see whether a Roth IRA rollover is a good idea for you. IRA accounts themselves may charge account maintenance and other fees, but there is typically no fee associated with opening an account to roll over assets.

**Trading limits, fund expenses, and minimum investments may apply.

†Vanguard average expense ratio: 0.18%. Industry average expense ratio: 1.01%. Sources: Vanguard and Lipper, a Thomson Reuters Company, as of December 31, 2015.

Notes:

  • All investing is subject to risk, including the possible loss of the money you invest.
  • There are important factors to consider when rolling over assets to an IRA or leaving assets in an employer retirement plan account. These factors include, but are not limited to, investment options in each type of account, fees and expenses, available services, potential withdrawal penalties, protection from creditors and legal judgments, required minimum distributions, and tax consequences of rolling over employer stock to an IRA.
  • Advisory services are provided by Vanguard Advisers, Inc. (VAI), a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.
  • You must buy and sell Vanguard ETF Shares through Vanguard Brokerage Services (we offer them commission-free) or through another broker (who may charge commissions). See the Vanguard Brokerage Services and fee schedule commission for limits. Vanguard ETF Shares are not redeemable directly with the issuing fund other than in very large aggregations worth millions of dollars. ETFs are subject to market volatility. When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.
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