401(k) or 403(b)

[Mrs_Beastman]

I'm changing jobs this May due to lay-offs. My company now has a 401k and the new company has a 403b. My impression is they are basically that same set-up, am I right? So I can rollover with no messy issues?

[scruffy]

1. They do work pretty much the same . . .

And the amount you can put in is the same for either plan ($14,000 for 2005 + $4000 more if you are 50 or over).

Even though tax law lets you rollover the 401(k) into your new 403(b), you're usually better off to rollover the 401(k) into your own IRA. That way you will have much more flexibility on where to invest the proceeds. If you just roll it over into the new 403(b), you will be limited to the plan/investment choices offered by the new company.

[Marie26]

2. 403(b) rollover

My employer has an 403(b) plan & I was thinking about opening an account. The thing is, I'm thinking of changing jobs, and I'm not sure if the 403(b) can easily be rolled over into a 401(k), or if I'd be better off waiting awhile. Does anyone know?

[A HERETIC I AM]

3. The primary advantage to these plans is the employer match.

If your employer has a 403(b) plan then it is a Non-Profit company or an educational institution. If you remove the concept of an employer match, then you in effect have an IRA with the exception of being able to contribute more to a 401(K) & 403(B) plan than you can to an IRA on an annual basis.

If you leave your current job with the 403(B) plan and your new company has a 401(K) plan you can enroll in right away, you might be better off rolling those funds into an IRA. Then, at your new job, just take part in their plan and continue to grow your retirement. Your IRA will be there growing tax-deferred, you can contribute to it (up to a max of $5000 for 1997 plus another $1000 if you are over 50 years old) and you can allocate it any way you wish.

Here's a link to a FAQ page that has some good info;
http://www.403bwise.com/faqs/index.html

Also check out the IRS website for particular rules pertaining to the 2006 tax year at;

www.irs.gov

Their search engine is pretty good, just type in what you want to know and it will give you the publications pertinent to your question and links to them in .pdf format.

[Sgent]

4. Depends on the plan

403(b) plans are not required to offer a match -- but many do, especially in the non-profit sector.

[A HERETIC I AM]

5. 401(K) plans don't always require a match either....(depends on the plan)

One good feature they have is the larger amount you can contribute on an annual basis. In this regard, 403(B) and 401(K) plans are similar.

The downside is the (usually) limited number of investment choices offered in such plans.