403(b) Rollover to 401(k)

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 23, 2024

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What Is a 403(b) Rollover to 401(k)?

A 403(b) rollover to a 401(k) is a financial strategy wherein you transfer your retirement savings from a 403(b) plan to a 401(k) plan.

The 403(b) plan is commonly offered to employees of public schools, certain tax-exempt organizations, and ministers. In contrast, the 401(k) plan is generally provided by private sector employers.

The "rollover" refers to the direct transfer of funds from the 403(b) to the 401(k) account without incurring immediate tax consequences.

The primary purpose of such a rollover is typically due to a job change or the pursuit of enhanced investment options.

It's an essential tool that allows individuals to consolidate their retirement savings, streamline account management, diversify investment options, and potentially lower the associated fees.

It's crucial, however, to approach this strategy with care, considering factors like potential tax implications and early withdrawal penalties.

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Taylor Kovar, CFP®

CEO & Founder

(936) 899 - 5629

[email protected]

I'm Taylor Kovar, a Certified Financial Planner (CFP), specializing in helping business owners with strategic financial planning.

When a recent retiree felt overwhelmed by managing multiple retirement accounts, including a 403(b) from their teaching career, we discussed the benefits of consolidating into a 401(k) with their current employer. The rollover simplified their financial landscape, reducing paperwork and aligning their investments under one roof. This strategy not only made managing retirement savings easier but also optimized their investment choices, leading to better financial clarity and growth potential. Ready to streamline your retirement savings? Let's explore your rollover options today.

Contact me at (936) 899 - 5629 or [email protected] to discuss how we can achieve your financial objectives.


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Mechanics of a 403(b) Rollover to 401(k)

Initiation Process

To initiate a 403(b) rollover to a 401(k), you first need to confirm that your 401(k) plan accepts such transfers. Then, you'll typically need to contact the 403(b) plan administrator to start the process. They can provide a distribution form, which you'll complete and return.

Transfer Mechanisms

Funds can be transferred either directly or indirectly. A direct rollover, or trustee-to-trustee transfer, is where the funds move from your 403(b) account directly to your 401(k) without you touching the money.

An indirect rollover means the funds are sent to you, and you have 60 days to deposit them into your 401(k).

Tax Implications

In a direct rollover, there are typically no immediate tax consequences because the money remains within a tax-advantaged retirement account.

An indirect rollover, on the other hand, can trigger a mandatory 20% withholding for taxes, which you'll have to replace from your pocket to complete the full rollover within the 60-day window.

Mechanics of a 403(b) Rollover to 401(k)

Key Considerations in a 403(b) Rollover to 401(k)

Evaluating the Quality of the 401(k) Plan

Before moving funds, assess your 401(k) plan's quality. Look at the fees, investment options, and other features. If your 401(k) plan doesn't match up to your 403(b) in these areas, the rollover might not be beneficial.

Understanding the Tax Impact

While rollovers are generally non-taxable events, missteps (like missing the 60-day window for indirect rollovers) can trigger unexpected tax liabilities. It's crucial to understand the tax implications fully.

Effect on Loans and Required Minimum Distributions

If you have an outstanding loan in your 403(b), you'll need to repay it before rolling over, or it will be treated as a taxable distribution. Additionally, if you're 73 or older, you'll need to take your required minimum distribution before conducting a rollover.

Process for a 403(b) Rollover to 401(k)

Scrutinize Current 403(b) and 401(k) Plan Details

Before initiating a rollover, thoroughly review your existing plans. Understand the fees, investment options, and potential penalties of each plan.

Consult With a Financial Advisor

Speak with a financial advisor before making any decisions. They can provide personalized advice based on your unique financial situation and goals.

Execute the Rollover Process

Once you've completed your due diligence and decided to proceed, you can initiate the rollover. If you're transferring directly, coordinate with your plan administrators. For an indirect rollover, remember the 60-day window and mandatory withholding.

Process for a 403(b) Rollover to 401(k)

Advantages of a 403(b) Rollover to 401(k)

Broadened Investment Options

One significant advantage of rolling a 403(b) into a 401(k) is the potential for a wider range of investment options. While 403(b) plans often limit investment choices primarily to annuities and mutual funds, 401(k) plans can offer a broader array of investments.

Streamlined Retirement Portfolio

Moving funds from a 403(b) to a 401(k) also streamlines your retirement savings. It's easier to manage and keep track of one account instead of several, especially when implementing a comprehensive investment strategy.

Potential for Lower Fees

Many 401(k) plans, especially those offered by large employers, often have access to institutional-class funds that offer lower expense ratios than the retail-class funds commonly found in 403(b) plans.

Disadvantages of a 403(b) Rollover to 401(k)

Risk of Early Withdrawal Penalties

If you choose to conduct an indirect rollover and fail to deposit the funds into your 401(k) within 60 days, the IRS can consider the money as a distribution, subjecting it to income taxes and potentially a 10% early withdrawal penalty if you're under 59½ years old.

Limited Withdrawal Flexibility

While 403(b) plans allow for withdrawals if you're 55 or older and no longer with your employer, 401(k) plans typically require you to be at least 59½. This could limit your financial flexibility if you retire early.

Transfer Restrictions

Not all 401(k) plans accept rollovers from 403(b) plans. It's crucial to verify this before initiating the process to avoid unnecessary complications and potential tax liabilities.

Advantages and Disadvantages of a 403(b) Rollover to 401(k)


A 403(b) rollover to a 401(k) allows retirement savers to consolidate their assets and potentially diversify their investment options.

While the process generally involves the direct transfer of funds with no immediate tax implications, it's vital to understand the various mechanics, including the initiation process and different transfer mechanisms.

Potential advantages of this rollover include a broadened investment scope, a streamlined retirement portfolio, and potentially lower fees.

Nevertheless, one must also consider the associated challenges, such as the risk of early withdrawal penalties, limited withdrawal flexibility, and transfer restrictions.

Before initiating a rollover, it's crucial to scrutinize both plans' details, understand the tax impact, and consult with a financial advisor. Being mindful of these factors can help ensure a successful transition toward a financially secure retirement.

403(b) Rollover to 401(k) FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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