403b rollover

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Posts: 1
Joined: Thu Sep 24, 2020 7:27 am

403b rollover

Post by gaspass »

Hi everyone,

I'm a new poster to this forum but have been a longtime user. Thank you for the wealth of information and help you've provided.

I'm 37 and my wife and I both work and are in the top tax bracket combined. My organization is ending their 403b program and is allowing 3 options:
1. tax free rollover into 401k
2. rollover in to IRA with no tax consequence (but will ultimately convert into ROTH with paying the tax now)
3. take as cash and pay tax

My question is whether it is a better choice to rollover into 401k without initial tax implications or to covert into ROTH with paying tax now. Will the potential growth in ROTH out pace the tax I will pay now? Amount is 222k. This requires a lot of assumptions and the calculations I've run haven't yielded a definite answer to me. Eager to hear your thoughts.

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David Jay
Posts: 9411
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: 403b rollover

Post by David Jay »

Welcome to your first post!

Without question, roll over into a 401k. It is hard to come up with a situation where one should make taxable distributions (Roth conversion or withdrawal) when in the top tax bracket.

The math is very simple: tax rate at time of contribution versus tax rate at time of distribution. It is very likely that you will be in a lower tax bracket in retirement. The math is shown on the Wiki in the “traditional vs Roth” topic here: https://www.bogleheads.org/wiki/Traditional_versus_Roth
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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