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When you decide to rollover your 403b to an IRA, you first have to figure out whether you want a direct rollover or an indirect rollover.
Convert 403b to IRA Rules:
When you opt for a direct rollover, the funds from your 403b plan go directly into your IRA. This process is expedited by your employer (or your old employer if you are changing jobs). You do not get the money in your hands. When you want the money to be transferred from your 403b to an IRA account, you have to call the new financial institute and ask them to get in touch with the old financial institute to arrange the transfer.
As per IRS guidelines, a direct rollover from 403b to an IRA can be done by direct payment, wire transfer or check to the IRA account. If the old financial institute is executing a wire transfer, it has to done to the trustee of the IRA plan. Likewise, the check has to be made out to the trustee of the IRA account. Usually a bank or a brokerage will function as the IRA account trustee. You should get written instruction from the trustee the method through which the money can be rolled over.
In a direct rollover, the old financial institute will not withhold any money as taxes so you do not worry about not having the entire amount from your 403b for investing. When you are rolling over money to an IRA, it can be done only into a traditional IRA and not a Roth IRA. However, you can roll over money from a traditional IRA to a Roth IRA.
You can also opt for an indirect rollover. Here you will receive the check in your name. However, there is a disadvantage to this rollover method. As per law, the old financial institute will withhold 20 percent of the amount for federal taxes. You will receive just 80 percent and you have 60 days to rollover the money or you will have to taxes as well a 10 percent penalty for early withdrawal. In addition, you have to replace the 20 percent with your own money. If you do not add the 20 percent, it will be considered as early withdrawal and you will have to pay taxes and a penalty on that amount.
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