Changing 403b funds for another 403b fund

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maestro1868
Posts: 78
Joined: Wed Sep 02, 2020 9:23 am

Changing 403b funds for another 403b fund

Post by maestro1868 »

Hello,

At the moment, we are contributing to a 403b 2030 Target Retirement Fund using Vanguard.

We would like to change our 403b 2030 Target Retirement Fund to a 2035 Target Retirement Fund.

What is involved in making this transaction? Is it allowed? Any IRS considerations?

We are just going from one Vanguard fund to another Vanguard fund.

Thanks in advance.
runninginvestor
Posts: 1718
Joined: Tue Sep 08, 2020 8:00 pm

Re: Changing 403b funds for another 403b fund

Post by runninginvestor »

Typically in retirement plans, as long as the planned administrator doesn't forbid it, you can swap funds pretty easily and without ramification. For instance, for ours there is an "exchange" option that allows us to exchange a fund one for one (100% of old funds into 100% of the new fund), or a combination of multiple funds .

This shouldn't involve any tax consequences as long as you don't withdraw anything. Since you are currently contributing, there might also be an option that asks you whether or not you want to have new contributions go into this new fund.
fposte
Posts: 2188
Joined: Mon Sep 02, 2013 1:32 pm

Re: Changing 403b funds for another 403b fund

Post by fposte »

It depends on how your employer handles it. There are no tax implications when exchanging funds within a 403b; assuming that your employer's 403b offers both those funds and that you have the ability to make the change online, which is my guess from your description, it could be as simple as requesting an exchange from one fund to the other in the transactions menu.
runninginvestor
Posts: 1718
Joined: Tue Sep 08, 2020 8:00 pm

Re: Changing 403b funds for another 403b fund

Post by runninginvestor »

The only IRS consideration would be if you hold the new fund in a taxable account. You may or may not run into a wash sale. But even that's highly debated whether or not moving money in retirement accounts affects the wash sale rules.
Topic Author
maestro1868
Posts: 78
Joined: Wed Sep 02, 2020 9:23 am

Re: Changing 403b funds for another 403b fund

Post by maestro1868 »

Thank you Runninginvestor and Fposte!

I will reach out to my employer to see how this is handled.

Otherwise, it seems very straightforward.
lakpr
Posts: 9390
Joined: Fri Mar 18, 2011 9:59 am

Re: Changing 403b funds for another 403b fund

Post by lakpr »

In my 401(k) plan, you cannot buy a fund that you sold for 60 days. Automatic payroll deposits are exempted.

These rules are put in place to discourage frequent trading within the retirement plans, which can wreak havoc in terms of accounting etc.
Topic Author
maestro1868
Posts: 78
Joined: Wed Sep 02, 2020 9:23 am

Re: Changing 403b funds for another 403b fund

Post by maestro1868 »

lakpr wrote: Tue Jan 24, 2023 6:11 pm In my 401(k) plan, you cannot buy a fund that you sold for 60 days. Automatic payroll deposits are exempted.

These rules are put in place to discourage frequent trading within the retirement plans, which can wreak havoc in terms of accounting etc.
Ahh...thanks for this insight lakpr!
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