403b options

L1: 403b optionsHello. I have thoroughly enjoyed this site, since finding it last week but I still have a question that confuses me. I will be 50 in about a week. I plan on retiring the year I turn 55. I can”t get a straight answer from the company that manages my 403b and I honestly don”t think they know or at least the people I have talked to. The last thing I was told was that I would have to seperate from my employer and roll over my 403b to an IRA and then I am guessing annuitize or do a sepp. I know the annuity route is the least attractive. My question is, isn”t there a way to go directly from a 403b to do this when you turn 55, or is the rollover a necessity. Also if I have to seperate from my employer, can I return as a new employee to my previous employer after setting up the plan and work part time. Thanks for your help!2007-12-05 20:04, By: GREG, IP: [4.88.124.245]
L2: 403b optionsYou have to “separate from service from your employer” in the year in which you will become or are 55 or older. If you do, then you do not have to set up a SEPP 72-T in order to take distributions and avoid the 10% penalty for “early distributions”. You would have satisfied one of the exceptions to the 10% penalty rules. If your employer allows you to remain a participant in their plan, and allows you to take distributions from the plan, you will not be subject to the 10% penalty. Check with your employer if you could then take distributions whenever, and in any amounts, or if you had to set up a regular distribution program of frequency and amounts. If so to each of these criteria, then you would probably be best served to proceed that way, unless you are unhappy with the investment choices available to you in their plan. However, once you roll over your 403-B into your IRA, you would be subject to the 10% penalty on distributions from your IRA before reaching 59 1/2, unless you set up a SEPP 72-T plan based upon some or all of your IRA accounts. (See other postings which discuss the rationale for keeping a 2nd IRA account that would not be part of your SEPP 72-T plan in case you need additional funds for emergencies.
I”m not sure if you could work again for your employer without negating the “separation from service” provision, but there are new regulations for “partial” retirements that might be involved in allowing it, or it might be allowed regardless. Someone else will answer that.2007-12-05 21:01, By: dlzallestaxes, IP: [141.151.95.136]

L2: 403b optionsHello, Greg:
I truly sympathize with anyone who has a 403b. My wife taught and administered in our local school district for 30 years. She joined the 403b plan in 1986 and she contributed to that until she retired in 2001. Much of this time period was the greatest stock boom in living memory, yet her 403b grew at about 1/10th the rate of my 401k plan. 403b plan owners are pretty much a captive audience and the insurance companies are very well aware of it. Most 403b plans have very high fees, are rife with misinformation or no information at all, have many conditions that oppose money movement within their various funds, have limited investment options, and have horrible investment performance. Other than this, they are great.
When my wife retired, I could not get her money away from the miscreants running her 403b plan fast enough. When she separated from service, I requested that they hand over her money and was given lots of excuses for 3 months before we finally got it. During this time, we received multiple mailings in which we were warned of “potentially dire tax consequences” of this action. Consequences? Dire? Not even close. Taxes and consequences were nil as we transferred the money into a rolloverIRA; a factof which the insurance company was well aware.
During the 6 years that we have had her money in an IRA, she has gained an average of a bit over 14% a year compared to the 1.5% or so she gained annually in her 403b plan. Her 403b plan was all in stocks and was split between growth and growth and income shares. It was not in any money funds or bond funds, since wewanted growth. Unfortunately, we did not get it.
I fully realize that every situation out there is different and that there really are some good 403b plans. Unfortunately, these are the exception and not the rule.
For some great info on 403b plans, check out the www.403bwise.com web site.
Good luck with your coming retirement. Teachers are anything but over-paid and well deserve a comfortable retirement.
Regards,
Ed_B
2007-12-08 10:23, By: Ed_B, IP: [67.170.159.37]

L2: 403b optionsEd I went to 403bwise and I found a lot of unhappy people. I am not in the teaching profession, but medical as I work for a non profit hospital. I evidently have been very fortunate as my 403b is loaded with options and our people have negotiated lower cost with our carrier as our group has grown. I have been very pleased as in 17 years I have put into the 403b the max allowed and have accumilated $500,000. at present. I don”t know my rate of return but I sure can”t complain. It may be a different story when I try to take it out.2007-12-10 19:53, By: GREG, IP: [4.88.124.164]

L2: 403b optionsWith respect to returning to the same employer after separation, you would need to get specific answers from the plan administrator relative to the employment status and/or hours worked per week. If you are inelgible to re join the plan, then your separation of service status would probably continue. However, if you got back into the same plan, you are obviously no longer separated and any age 55 exception would terminate.
The age 55 exception may not be of much value if the plan does not offer adjustable periodic distributions. If all the plan will offer is a lump sum, the advantage of the age 55 penalty exception would be washed away with a large annual distribution that would inflate your tax bracket more than the 10% you are saving. Again, you would need specifics from the plan on their periodic distribution options.
I seriously doubt that a 403b plan would offer a SEPP plan as an option to periodic distributions today, but since the new 403b Regs will make these plans more like 401k plans, perhaps you would have that option by the time you separate.2007-12-10 21:20, By: Alan S., IP: [24.116.165.60]