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Start now to switch 403(b) accounts

Tina DeWitt and Charlie Wick
Vail, CO, Colorado

If you work for a school, hospital, religious organization or other non-profit group, you may be contributing to a 403(b) plan.

All 403(b)s offer tax-deferred earnings growth, which is a big advantage to you as you save for retirement. Yet, 403(b) plans can also differ significantly from each other in how they are administered and in their investment choices.

If you are unhappy with your current plan, you might be able to switch to a different one ” but you’d better make your move soon, because this “freedom of choice” may soon be gone. Specifically, the Internal Revenue Service plans to restrict “90-24 transfers” ” the technical name for the ability to move to a different 403(b) plan ” in January 2008. In other words, you’ve got until the end of 2007 to switch plans.



But don’t wait until then to start, because it can take some time. You’ll have to contact your employer’s benefits department or provider, and you may also have to work with the vendor who runs your 403(b) plan. Although the IRS allows these transfers, your existing vendor is not required to make them. However, public school districts, in particular, will cooperate with your desire to switch.

But if you are going to move your 403(b) assets into a new plan, consider these suggestions:

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Don’t take possession of the funds. A 90-24 transfer is known as a “trustee-to-trustee” transfer. This means that the trustees ” those who hold the money now and those who will receive it in the new plan ” must handle all exchanges of the funds.

This is more than a technical point; if you receive the funds, even for a very short time, you may have to pay early withdrawal penalties. So, make sure the transfer is done properly.

Do your homework when considering new providers. Before you transfer your 403(b) assets, make sure the new provider offers a reputation for quality service, the willingness to answer all your questions and a clear-cut process for making changes to your plan.



Take responsibility for your success. Finally, don’t forget that no matter how helpful a 403(b) provider can be, you are the one ultimately responsible for the success of your plan in helping you build resources for retirement.

So, if you are considering transferring assets to a new plan, consult with your financial advisor to help make sure your new investment mix will be appropriate for your individual risk tolerance and time horizon.

Don’t wait too long to act. Your ability to switch 403(b) plan providers may be subtracted in just a few more months.

Charlie Wick, Tina DeWitt, Jessie Steinmetz, and Todd DeJong are financial advisors with Edward Jones. They can be reached in Eagle at 328-4959, in Edwards at 926-1728, in Gypsum at 524-1510 and in Avon at 845-1025.


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