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403(b) rollover Q
Old 07-30-2010, 08:32 AM   #1
Dryer sheet wannabe
Join Date: Jul 2010
Posts: 10
403(b) rollover Q

Long long time lurker (10 years now!), but first time poster. Have really appreciated all of the advice I've read over the years, it's really helped guide our strategies as we've established our retirement plans.

Have a question about a 403(b) that my wife has from a previous employer, and would appreciate any thoughts folks have. Basically, trying to decide whether to roll over an older cost-prohibitive account and pay surrender charges, or wait it out.

1. the account is about $20k, and is in index funds within an AXA variable annuity. This is a very small portion of our retirement assets (vast majority are in roth/401(k)/taxable low-expense index mutual funds), and we understand it's a terrible option, given other choices. Which is really what this is about, now that we have other choices

2. Her new employer allows Vanguard as a 403(b) provider, and we'd like to utilize that as additional tax-deferred savings. Already max'ing Roths, 401k, healthy contributions to taxable accounts, etc.

3. We want to rollover the older 403(b) into a Vanguard IRA. But at the moment, as far as I can tell we pay a 5% surrender charge for any contributions that haven't been in the account for more than 6 years, which is probably 70% of the account value right now.

4. We haven't contributed to it for the last 2.5 years, so over the next couple of years the % of the account that's been there long enough will increase pretty rapidly. But we'll need 3-4 more years to avoid the charge entirely.

If we elect to wait on the rollover to avoid the surrender charges, can we still start up the 2nd Vanguard 403(b) with the new employer (I assume you can have more than one?)? And then rollover the older account into an IRA in a few years once the account funds are fully vested? Or should we bite the bullet now and pay the surrender charges?

Thanks for any thoughts!
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