Saving for Retirement

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

June 23, 2017

If you're holding on to an old 403(b)(7) account with a former employer, you may be wondering what to do with it. Since employer plan assets often make up a significant portion of retirement savings, it's essential to examine your options carefully before you make a move to ensure you're getting the most from your money.

You generally have 4 options:

  • Leave the assets where they are. A $5,000 minimum balance is typically required to keep your account in your former employer's plan.
  • Roll over the assets to a traditional or Roth IRA.
  • Transfer the assets to your new employer's plan, if the plan allows.
  • Cash out or withdraw the assets. In most cases, this should be a last resort because distributions taken from a tax-deferred plan before age 59½ are subject to both ordinary income taxes and a 10% early-withdrawal penalty.

A rollover could make your life simpler

If you're 59½ or older or no longer work for the employer who sponsors your plan, you may want to consider rolling over your plan assets to an IRA. By rolling over to an IRA, you could gain greater investing flexibility without incurring fees or tax consequences.*

If you've changed jobs more than once and hold savings in several employer plans, you have an even better reason to consider a rollover. Tracking multiple plans can be confusing. You may be duplicating investments, and could even be exposed to more risk than you'd like.

Consolidating your 403(b)(7) account balances into one IRA can make it easier to control your assets and see at a glance how much you've saved for retirement. And equally important—it will make withdrawals easier once you're retired.

Simplify life even more by rolling over to a Vanguard IRA

With a Vanguard IRA®, you can easily access your money anytime you need to. Plus you'll have a broad selection of investment options, including not only Vanguard mutual funds and ETFs (exchange-traded funds), but also CDs (certificates of deposit), individual stocks and bonds, and even mutual funds and ETFs from other companies.** And since you can hold multiple types of investments in a single Vanguard IRA, you're free to mix and match.

Of course, if you currently hold Vanguard mutual funds you want to keep, you can do that too. And if you're interested in narrowing your choices and aren't sure how to go about it, we can lend a hand. Call us at 844-859-0275 for help or additional information.

Qualify for even lower cost shares and fewer fees

Depending upon your account balance, rolling over your assets to a Vanguard IRA could make you eligible for Admiral™ Shares—a special share class of our mutual funds with expense ratios that are 41% lower than our standard low-cost Investor Shares.† Lower expense ratios mean you can keep more of your savings for retirement (and potentially have more income during retirement).

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

A rollover to Vanguard is almost as easy as, well, rolling over

At Vanguard, rollovers are pretty straightforward. We've walked thousands of clients through the process, and we can easily do the same for you. A rollover typically takes 2 to 3 weeks to complete, but it only takes a few minutes of your time to get the process started. Once you set things up, we handle most of the remaining details.

So do yourself a favor. If you think it's time to move your plan assets, first take a good look at your options. Then if you decide that an IRA's your answer, consider the advantages of rolling over to a Vanguard IRA.

*If you roll over your 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.

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

†Vanguard Admiral Shares average expense ratio: 0.12%. Vanguard Investor Shares average expense ratio: 0.20%. Mutual-fund only industry average expense ratio: 0.69%. All averages are asset-weighted. Industry averages exclude Vanguard. Sources: Vanguard and Morningstar, Inc., as of December 31, 2016.

Notes:

  • All investing is subject to risk, including the possible loss of the money you invest.
  • You must buy and sell Vanguard ETF Shares through Vanguard Brokerage Services (we offer them commission-free) or through another broker (which may charge commissions). See the Vanguard Brokerage Services commission and fee schedules 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.
  • There are important factors to consider when rolling over assets to an IRA. 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.
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