Roth 403b to Roth IRA within same brokerage

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asdfgghk
Posts: 22
Joined: Thu Apr 23, 2020 2:03 pm

Roth 403b to Roth IRA within same brokerage

Post by asdfgghk »

Young person in career with expected large salary potential ($>200k/yr) following a few years of indentured servitude.

Left my previous employer and have a new employer who uses a different brokerage (with no Roth option); not sure if this is relevant.

I was considering consolidating my previous employer's Roth 403b with my Roth IRA which I have through that same broker to allow for more investing flexibility. I will be keeping my new employer's traditional 403b separate (different broker) until I leave them.

Apart from less legal protection in an IRA, is there something important I am not considering (with a future high income potential in mind) prior to this intra-broker 403b->IRA rollover? I want to make sure I am not missing anything before I go through with this. FWIW, it doesn't appear this would effect my ability to do a bd Roth in the future (question mark?).

Thank you for your help and let me know!
Katietsu
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Joined: Sun Sep 22, 2013 1:48 am

Re: Roth 403b to Roth IRA within same brokerage

Post by Katietsu »

It sounds like you have a good understanding. And you are right that there would no effect on ability to do back door Roth.
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retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Roth 403b to Roth IRA within same brokerage

Post by retiredjg »

I would roll the Roth 403b into Roth IRA. Continue contributing to Roth IRA as much as you can while in indentured servitude.

Intra and inter-broker concerns are not particularly relevant.

The only thing that affects a future backdoor process is a traditional IRA (including rollover IRA, SEP IRA and SIMPLE IRA).

If your indentured servitude income is very low, you might consider not using the traditional 403b at all or to its full capacity because you will have many years later on to build up a good tax-deferred balance. Putting money into taxable while in a very low tax bracket and for a limited time can be useful. My thinking on this may be different from most suggestions you will get.


If you are very concerned about legal protections in an IRA, you could leave the old Roth 403b where it is. Later on when you have another Roth 401k/403b, you could roll it into that one.
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retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Roth 403b to Roth IRA within same brokerage

Post by retiredjg »

PS. Start keeping up with how every dollar gets into your Roth IRA (from the very beginning). You will need this information if you ever need/want to take money out of Roth IRA before age 59.5.
lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: Roth 403b to Roth IRA within same brokerage

Post by lakpr »

Check out the expense ratios of the funds in your Roth 403(b) and compare with the expense ratios of equivalent funds in the Roth IRA. With employer plans, sometimes (often?) you get access to Institutional Funds or Collective Investment Trusts, that carry far lower expense ratios than what you can get in retail. Then again, 403b plans are not particularly known for inexpensive choices, and actually notorious for having high ERs.

In my 401k plan, for example, I have access to Vanguard Institutional Index fund at 0.02%. The retail equivalent of that same fund, Vanguard S&P 500 Index fund, is available at 0.04%. So half the price. My plan also has Vanguard Target Retirement Fund series at 0.10% expense ratio each. The equivalent retail funds are offered at 0.15% each, so essentially a 33% discount.

Roth IRA offers you "flexibility"; but then, if you are subscribing to the Boglehead 3-fund philosophy, you just need 3 funds not 100 to meet your investment objectives.
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