Wanting to convert 403(b) to Roth IRA, rollover 1st to tIRA or not?

[Digger1000]

Is there any reason I should not do my Roth IRA conversions directly from a regular 403b? Would you rollover 1st from 403b to tIRA before converting to a Roth IRA? Only reason I can see for doing so is if I would want to recharacterize?

I'm am a newly FIREd 51 year old. I am wanting to over the next 15 years or more convert my 403b with TIAA to a Roth IRA with Vanguard. Currently I have a taxable S&P Index Fund at Vanguard. My 403b account with TIAA has been in the TIAA S&P Index Fund. Just recently my institution or TIAA themselves, not sure which, did away with the TIAA S&P Fund and instead they use the Vanguard S&P 500 Index Fund but Vangaurd does not have that money TIAA has it. It is the same expense ratio at both places. I had thought from some reading a couple weeks ago that if you tried to convert directly from a 403b(or 401k) to a Roth IRA that they automatically have to with hold 20% for fed. taxes, whereas a tIRA conversion to a Roth IRA they do not with hold fed taxes. I am planning to do my conversions to a Roth IRA in such a way that I will not have to pay any fed. taxes by staying within my deductions,exemptions. At any rate for the reasons above I sent for a rollover form form TIAA with plans to rollover to a tIRA with Vanguard 1st. However I see on the form from TIAA that if I chose to instead put it directly into a Roth IRA instead of putting in a tIRA, that there is an election box there to check giving you the option to not with hold any taxes.

So I'm wondering if indeed is that correct, can you choose to not have any fed taxes with held on a 403b conversion to a Roth IRA? If that is the case then I will leave the 403b where its at and make the yearly conversions to a Roth IRA directly from the 403b instead of 1st rolling everything over from the 403b to a tIRA. The reason I would leave it is because it is the fund I would choose to have it in anyway and it is the same expense ratio.

 

[pb4uski]

Talk with your 403b provider. You definitely do not want any withholding because the withholding would be considered an early distribution and subject to the 10% penalty in addition to tax... so even if you carefully calculate conversion amounts to avoid tax you still would have to pay the 10% early distribution penalty.

I think you are better to rollover some funds from your 403b to a tIRA and then convert money from the tIRA to a Roth. You avoid the withholding/early distribution penalty issue and, importantly, you can recharacterize money if you later find that you have converted more than you would like before the tax filing deadline. I'm not sure if you can recharacterize a conversion from tthe 403b to a Roth...if not, using the tIRA in between gives you more flexibility.

I rolled my entire 401k to a tIRA and have been converting up to the top of the 15% tax bracket. I usually overconvert a little and then finalize my tax return and the recharacterize any excess over the 15% tax bracket because, in my case, the small amount of covnersions above the 15% tax bracket are subject to 30% tax (15% on the conversion amount and 15% on capital gains push up into the 25% tax bracket).

https://www.irahelp.com/slottreport/withholding-and-your-ira-what-you-need-know

 

[zinger1457]

As long as you do a direct transfer from your 403b to a tIRA or ROTH IRA they won't take out taxes. It might be better to first transfer to a tIRA then do any ROTH conversions from there, that's what I'm doing with my TSP retirement plan. If you need to re-characterize any part of the ROTH conversion it will have to go to a tIRA, I'm pretty sure you wouldn't be able to send it back to your 403b. For me it's a lot easier to manage the ROTH conversions and re-characterizations if both accounts are held with the same company.