Job Changes and 403(b) Rollovers - Don't Leave Money Behind

If you just started your new role (resident, fellow or other), how are you finding it? Able to navigate the hallways of your new hospital? Getting on well with your colleagues?

You’ve got this! And if your parents never said it, we will – I’m proud of you!

This week is a bit more tactical. Let’s chat about new jobs and rolling over your 403(b) retirement accounts.

Most physicians change jobs 3-4 times during their careers. Residency to fellowship. Fellowship to first attending job. First job to better job. Maybe a move across the country.

Each time you leave, you face the same question: What happens to my employer-backed retirement accounts like my 403(b)?

Many people leave their old retirement accounts scattered at previous employers like a forgotten gym membership.

Out of sight, out of mind.

But this can cost you serious money over time.

Remember the Reddit Money Flowchart? In this flow, investing in retirement is one of the first major steps to take.

After your basic needs are met, continuing to fund your employer-backed retirement account is essential to your financial goals.

What Happens to Your 403(b) When You Leave

If you don’t choose to “roll it over”, then your former employer's rules now control everything. The investment options they picked. The fees they negotiated and the restrictions they set. You're stuck with whatever deal they made, not what's best for you.

Most employer plans have limited investment choices and higher fees than what you could get on your own. Why? Because managing retirement plans for employees isn't their main business. They often pick the easy option, not the best one.

Staying put usually costs you money long-term. Sometimes a lot of $$$.

Your Options

When you leave a job, you have several choices for your 403(b):

1. Leave it alone - Your money stays in your old employer's plan. You can't contribute anymore, but it keeps growing based on your investment choices. This provides limited options.

2. Cash out - You withdraw everything and pay taxes plus a 10% penalty if you're under 59½. We don’t recommend this option unless you're facing extreme hardship.

3. Roll to new employer's plan - Move your money to your new job's 403(b) or 401(k). This works if your new employer's plan is actually good, meaning that they offer a solid match in your benefits package.

4. Roll to an IRA - Move your money to an Individual Retirement Account that you control completely.

The Rollover Process Made Simple

Rolling over your 403(b) isn't complicated, but you need to do it right.

Direct rollover vs. indirect: Always choose direct rollover. Your old employer sends the money straight to your new employer's 403(b). With indirect rollover, they send you a check, and you have 60 days to deposit it in your new account. Miss that deadline and you owe taxes plus penalties.

Timeline: Most rollovers take 2-4 weeks. Sometimes longer if there's paperwork issues or if your old employer drags their feet.

Common hiccups: Wrong account numbers, missing signatures, or delays if your old employer uses a different record-keeper than your new one. Start early and follow up regularly.

When to Roll to an IRA Instead

If your new employer doesn't offer a 403(b), or if their plan has terrible investment options and high fees, roll to an IRA instead.

The big three brokerages that most physicians use are Vanguard, Fidelity, and Schwab. All three offer low-cost index funds, no account minimums for IRAs, and good customer service.

The process is similar, but instead of rolling to your new employer's plan, you roll to an IRA at one of these companies.

Action Steps

Don't wait until you're drowning in new job responsibilities. Handle your rollover as soon as you’re able to.

For those in a new role, if you have’t done the rollover - start now!

Keep records of everything: Save all rollover documents, confirmation numbers, and account statements.

Set up new investments immediately: Don't let your money sit in cash earning nothing. Pick your investments as soon as the rollover completes.

Consider Roth vs. traditional: If you're rolling over a Roth 403(b), it should go to a Roth IRA. Traditional 403(b) goes to traditional IRA.

Don't confuse the rules: With indirect rollovers, you have exactly 60 days to deposit the money in your new account. Miss it and you owe taxes plus penalties.

Your 403(b) follows you through your career changes. Make sure it's working as hard as you are.

Meme of the Week

Best,

M&H