Making the Right Move: 403(b) Rollover Options for Ministry Leaders
As a pastor or ministry leader, financial decisions often carry additional weight. Beyond personal financial stability, there’s the overarching goal of stewarding resources well to align with your faith and calling. One common question for those changing ministry positions or leaving their current roles is whether to roll over a 403(b) into an IRA.
The process can seem daunting, especially when considering tax implications, fees, and the impact on your long-term financial goals. This guide is designed to help you navigate the complexities of rolling over a 403(b) so that you can make a decision that aligns with your financial stewardship values.
Understanding Your 403(b) Rollover Choices
When deciding what to do with your 403(b) account from a previous employer, it’s essential to explore all your options carefully. Here are the primary options to consider:
Leave It with Your Former Employer
Many ministry leaders choose to leave their 403(b) with their previous employer if the plan offers low fees and strong investment options. However, having multiple accounts across employers can make managing your financial picture more complex.Roll It Over to Your New Employer's Plan
If your current church or organization offers a 403(b), rolling your old account into the new plan can simplify your finances. Be sure to compare the fees and investment options to ensure they align with your goals.Roll It Over to an IRA
Rolling over your 403(b) to an IRA can provide you with more investment options and greater flexibility. However, you should carefully evaluate advisory fees and tax implications, especially if you’re considering advanced strategies like a backdoor Roth IRA.
Choosing the Right Advisor
For ministry leaders considering a 403(b) rollover, the advice you receive is critical. Unfortunately, some financial advisors may recommend rollovers based on their own financial incentives rather than your best interests.
To protect yourself:
Seek Fee-Only Advisors: Look for advisors who operate as fiduciaries. They are legally and ethically bound to act in your best interests.
Ask the Right Questions: How are they compensated? What long-term costs might arise from their recommendations? Are their services focused solely on investment management or on holistic financial planning?
Get a Second Opinion: Before making major decisions, seek input from a trusted advisor to ensure you’re receiving impartial advice.
The Impact of Fees on Long-Term Growth
Even a seemingly small fee, such as a 1% advisory charge, can significantly erode your retirement savings over time. For ministry leaders, whose financial resources are often stretched, minimizing unnecessary fees is essential for maximizing long-term growth.
Consider Tax Implications
A common oversight when rolling over a 403(b) to an IRA is the potential tax complications. For example, if you’re using a strategy like a backdoor Roth IRA, a rollover could trigger the pro-rata rule, leading to unintended tax consequences. Understanding these details is crucial for protecting your retirement savings.
Let’s Find the Best Path for You
Every ministry leader’s financial situation is unique, and the best choice depends on your goals, the specifics of your 403(b) plan, and your broader financial picture. That’s why personalized guidance is so important.
If you’re unsure about your next steps, I encourage you to connect with Legacy Path Advisors. We specialize in helping ministry leaders navigate these decisions with clarity and confidence. Reach out today for financial advice tailored to your calling and long-term goals.
Final Thoughts
Your 403(b) is a critical component of your financial stewardship. Whether you choose to leave it where it is, roll it into a new plan, or transition to an IRA, make the decision prayerfully and with careful consideration of the costs and benefits. With the right guidance, you can align your financial plan with your ministry and prepare for a secure future.
