Now That I’m Retired, What Should I do With My Teachers’ 403(b)/Tax Sheltered Annuity?

Teachers with 403(b) Tax Sheltered Annuities are often shielded from knowledge of the options–investment and otherwise–that are available to them upon retirement.  This article will fill in the gaps left by your 403(b) adviser.

403(b)/Tax Sheltered Annuity Rollover Options

Now That I’m Retired, What Should I do With My Teachers’ 403(b)/Tax Sheltered Annuity? 

403(b) retirement plans are utilized by tax-exempt organizations in the same manner that 401(k) plans are utilized by the private sector; e.g., corporations and business owners.  Because annuities, which are offered by insurance companies, were the original investment vehicle used by most public schools, teachers often refer to their 403(b) plans as Tax Sheltered Annuities or TSAs.

Most 403(b) investors take advantage of the tax code, which allows them to roll over their 403(b), tax- free, into a self-directed/professionally guided rollover IRA,  The advantages of doing so are:

  •  Fixed 403(b)/TSA performances are limited to the stated yield, which often are unattractive and may not achieve your investment goals;
  • Investment choices in variable 403(b)s are limited to the funds offered by the insurance company.
  • Variable 403(b)s often have hidden costs, which include, in addition to the management fees for the funds, the mortality and expense risk fee (M&E).  The M&E fees may have a significant impact upon the future value of your retirement nest-egg.
  • Rolling over your 403(b) into a self-directed/professionally guided IRA allows you to invest in any one or more of the universe of investments.
  • A self-directed/professionally guided IRA rollover of your 403(b)/TSA will enable you to employ Modern Portfolio Theory (MPT) as your investment strategy during your retirement years.  MPT is designed to maximize one’s returns while minimizing risks as we evolve through the economic cycles.

Roth IRAs
If you convert your traditional IRA into a Roth IRA, the distributions taken by you and/or your heirs will be tax-free.  (Generally, distributions from traditional IRAs are taxable as ordinary income.) The invesment advantages noted above for the traditional self directed/professionally guided IRA are available in a Roth IRA, as well.  To avoid any unnecessary tax consequences, an experience financial consultant should plan the conversion process with your tax advisor.  For further informtion, see: ROTH: To Convert or not to Convert.

IRA Rollovers
The triggering events that allow you to rollover your 403(b) into an IRA are:

  •   Separation from service
  •   Disability
  •   Age 591/2

For additional information and/or for a schedule of seminars on Retirement Planning for Educators to be held in your neighborhood, contact:


Add a Comment