What happens to my 403(b) when I leave the district? [VIDEO]

It’s that time of year – teachers are gearing up for retirement, or looking forward to changing districts, or have been hit with the news that they will not be returning to their jobs next year.

It’s important to not lose relationships with your current district, as you may need to call on people in the future (or even maintain friendships), but you should seriously consider the consequences of leaving your 403(b) behind. Watch this video to find out why that can be a bad idea, and what options you should consider:




In this video, we’re going to talk about what happens to your 403(b) when you leave a district. Now, as you can see behind me, my wife has decorated for Easter. It’s the time of the year where mature teachers are looking at retirement. Unfortunately, some teachers have been told they’re going to be let go. Or other teachers are looking into maybe make a change and leave their district. What happens to the 403(b) when you leave? There’s five things.


1 .The first thing that can happen to your 403(b) is you do nothing. You leave it right where it is. I don’t like this option. It’s not the worst option; that’s option number two. But if you leave it where it is and you’re in another district, you’re not paying attention to that old account. Worse, if you move, that 403(b) provider in that district has no way of contacting you to get in touch about that account.


2. The second thing you can do with that 403(b) is cash it out. Horrible option. Don’t do this one. Please. The 403(b) is meant for your retirement. If you have it in an old district, it’s still for retirement. Leave it alone. If you cash it out and you are under age 59.5, you’re going to pay a 10% penalty on the balance and you’re going to pay taxes on it as though you earned it as income. So a $10,000 403(b) that’s cashed out will include a $1,000 penalty and an additional $10,000 onto your income.


3. We’re moving on to the positive options here, what you can do. You can move it to your new district’s 403(b) plan. So let’s just say you had an AXA 403(b). You go to a new district, fill out the payroll forms, you can actually change the code on your 403(b), contact your 403(b) vendor, and they’ll just code it to the new district. It’s easy. You get to keep the same account and make savings to it. It may be different for other types of 403(b)s, or the district rules, but it shouldn’t be an arduous process.


4. You can transfer your 403(b) to a new vendor. Now, sometimes this happens if a teacher moves, and the vendor that they were using is not available. So they open up a new 403(b), take the old one and transfer it over. Now if you’ve been putting money into a 403(b) and you choose to transfer it, that company can choose to charge you to move that money. So make sure you’re aware of all the charges that can take place.


5. Now by far the best option to do when you leave a district, move your 403(b) to an IRA. They can open an IRA at a bank, at a custodian, like a Charles Schwab, Fidelity, or Vanguard, and they can hold your money for a lot cheaper than a 403(b) would. You can also choose a lot more options for investments than you would have inside a 403(b). If you’re not entirely sure what goes into that, I’m here to help.