403(b) to IRA Rollover: Rules for Teachers and Nonprofit Employees
A 403(b) plan is the workplace retirement plan for public schools, colleges, churches, and many nonprofits. When you leave the job, you can usually roll those assets into an IRA.
This guide is for teachers, school staff, hospital and nonprofit employees, and ministers. It covers when you can roll over, how to move funds without a tax bill, and what you give up by leaving the plan.
Sources: IRS 403(b) plan pages and FAQs, the IRS rollover chart, IRS Topic 413, Publication 575, Publication 590-A, and IRS Notice 2025-67 for 2026 limits.
What is a 403(b) retirement plan?
A 403(b) plan, also called a tax-sheltered annuity plan, is a retirement plan offered by public schools and certain 501(c)(3) tax-exempt organizations. The IRS says it is similar to a 401(k) at a for-profit company.
Eligible employers include public schools, colleges, and universities, churches, and charities exempt under section 501(c)(3). Employees defer salary into individual accounts, and the employer may add contributions. It is an employer sponsored retirement plan, so the employer picks the vendors and the investments.
How 403(b) investments are held
The IRS lists three ways 403(b) assets can be held: an annuity contract from an insurance company, a custodial account invested in mutual funds, or a retirement income account for church employees. Individual stocks generally aren’t among a 403(b)’s investments.
The IRS also notes that investment options in a 403(b) plan are limited to those the employer chooses, and that some plans have high administrative costs. Those limited investment options are a common reason people look at a rollover.
2026 403(b) contribution limits
For 2026, the employee deferral limit for a 403(b) plan is $24,500, per IRS Notice 2025-67. Workers 50 and older can add an $8,000 catch-up, and those aged 60 to 63 can add $11,250 instead. Funds you roll over don’t count against these limits or against IRA contribution limits.
When can you roll a 403(b) plan into an IRA?
You need a distribution that is eligible for rollover. Under the tax code, money you deferred from salary into a 403(b) generally can’t be paid out until you reach 59½, have a severance from employment, become disabled, die, or have a hardship. Hardship withdrawals can’t be rolled over.
403(b) rollover after leaving a job
Leaving the job is the most common trigger. Once you separate from the employer, the plan can make a distribution of your balance, and you can roll the entire amount or just part of it to an IRA.
You don’t have to wait until retirement. Moving to a new employer, retiring, or leaving teaching all count.
Can I roll over my 403(b) while still employed?
Sometimes. A 403(b) may allow withdrawals once you reach 59½, even while you still work there. If your plan permits these in-service withdrawals, you can generally roll them to an IRA.
If it doesn’t, you’ll need to wait until you leave. Ask the plan administrator what your plan allows.
Your 403(b) rollover options
When you leave a job, you generally have five rollover options for the money.
Leave it in the 403(b) retirement plan. If the plan allows it, your investments keep growing tax deferred, and plan rules stay the same.
Move it to a new employer plan. A 401(k) or another 403(b) at a new employer can take the money if that retirement plan accepts rollovers.
Roll it to a traditional IRA. This keeps tax-deferred growth and opens up more investment options.
Roll it to a Roth IRA. You pay income tax now in exchange for tax-free withdrawals later.
Take cash. The payout is subject to income tax and may face a 10% additional tax.
What is a rollover IRA?
A traditional IRA used for this money is often called a rollover IRA. Some providers sell an account by that name, a Fidelity rollover IRA for example, but a rollover IRA at any IRA provider follows the same IRS rules. We don’t recommend a specific provider.
Direct rollover: how to avoid taxes on the move
A direct rollover sends the funds from the 403(b) straight to the IRA custodian. No tax is withheld, and moving pre-tax assets to a traditional IRA isn’t a taxable event.
If the plan pays you instead, the indirect process applies: it must withhold 20% for federal taxes, even if you plan to roll it over. You then have 60 days to deposit the full distribution, using other funds to replace the 20%. Any amount you don’t deposit becomes taxable income.
Our IRA transfer vs rollover and 401(k) to IRA rollover guides explain the indirect rollover process, the 60-day rule, and late-rollover self-certification in detail.
How to roll a 403(b) plan to an IRA, step by step
The rollover process usually takes a few weeks. Here is how to complete it:
- Open the new IRA with the IRA custodian you choose: a traditional IRA for pre-tax money, a Roth IRA for Roth 403(b) money. Decide how you’ll invest.
- Contact the plan administrator or the vendor that holds your 403(b) assets and investments. Ask for its distribution request form and how it pays a direct rollover.
- Give the plan the receiving details. Some plans ask for an acceptance letter from the new IRA provider confirming it will take the money.
- Choose a direct rollover distribution of the entire amount or the part you want to move.
- Confirm the move is complete in the new IRA account.
- Invest the funds. Funds that arrive in an IRA usually sit in cash until you invest them. Review investments after the deposit.
If your 403(b) assets sit with more than one vendor, each may need its own form and process.
Paperwork you may need
Plans and vendors vary, so ask about each step of the process. Expect a distribution request form, the IRA account number and payee name, and possibly an acceptance letter. Some plans need your employer to confirm your separation date before they release funds.
403(b) to Roth IRA: when you pay taxes
You can roll pre-tax 403(b) money directly into a Roth IRA. The IRS rollover chart says this amount must be included in income, so it is taxed at ordinary income tax rates in that tax year. That works like a Roth conversion.
Plan the cash to pay taxes from outside the account, so more of your investments stay put, and ask a tax advisor how the extra income affects your bracket.
Roth 403(b) money
A designated Roth 403(b) account can roll to a Roth account in an IRA without tax, because those contributions were made with after-tax dollars. The years in the plan don’t count toward the IRA’s own five-year period. If this is your first Roth, its clock starts with the rollover year.
After-tax contributions
If your 403(b) holds after-tax money that isn’t Roth, you can split one distribution: pre-tax money to a traditional IRA and after-tax money to a Roth. Track any after-tax basis in a traditional IRA on Form 8606.
Is there a penalty for rolling over a 403(b) to an IRA?
No. If you complete a rollover of a plan into an IRA properly, there’s no penalty. Penalties come from funds you keep.
Any distribution you don’t roll over is taxable and may face the 10% additional tax if you’re under 59½. The 10% tax doesn’t apply to a 403(b) distribution after you leave a job in or after the year you turn 55, but that exception doesn’t carry into an IRA.
A 403(b) loan that’s offset when you leave can still be rolled over by your tax return due date, including extensions. See our IRA early withdrawal exceptions guide for how exceptions differ for IRAs and plans.
Benefits of a rollover IRA for your retirement funds
When you roll a 403(b) to an IRA, the account holder gets more control over retirement funds and retirement assets.
More investment options. Many IRAs offer stocks, bonds, mutual funds, and ETFs, while the 403(b) menu is set by the employer. More investment choices let you invest in line with your investment strategy.
Costs you can compare. You pick the provider and can compare the costs of investments and account fees with the plan’s.
Simpler financial planning. Fewer accounts mean fewer statements and one place to manage funds and investments.
What you give up by leaving the 403(b)
Leaving the retirement plan isn’t always right. Compare these points first.
Age-55 access. Plan withdrawals after leaving a job at 55 or later avoid the 10% tax. IRA withdrawals before 59½ generally don’t.
Loans. Many plans allow loans. An IRA can’t.
Annuity features. If your 403(b) holds an annuity contract, ask the insurer whether surrender charges or guaranteed rates apply before assets move.
Fees inside the plan. Some 403(b) plans have low costs on their investments. Compare before you assume an IRA is cheaper.
Combining retirement accounts and retirement savings in one account
Teachers who change districts often end up with retirement accounts at several former employers. Each retirement plan has its own rules, statements, and investments.
You can roll them into a single IRA, which can help you see all your retirement savings and keep your assets and investments in line with your retirement goals and financial goals.
Moving a 403(b) to a new employer’s 401(k)
Some people move a 403(b) to a new employer plan, such as a 401(k), instead, especially if the new employer offers low-cost investments. Compare the 401(k) fees with an IRA’s.
What is the best thing to do with a 403(b) when you retire?
There is no single answer, and the right IRA choice depends on your situation. If you plan to stop work between 55 and 59½, leaving money in the 403(b) keeps penalty-free withdrawals. If you want more investment options or simpler accounts, a rollover IRA may fit.
If you expect higher tax rates later, moving part of the 403(b) to a Roth in a low-income year might make sense. Spread larger moves across years to manage the tax.
Is it a good idea to roll over a 403(b) to an IRA?
It can be, especially if the plan has limited investment options or high costs, or if you want one account. It may not be if you’ll need age-55 access, a loan, or annuity features.
A tax advisor or financial planning professional can review the potential tax implications and tax consequences. Get tax advice before any Roth move, since the tax consequences can be large.
How a 403(b) rollover is reported
The plan reports the assets distributed on Form 1099-R for the year of the distribution. A direct rollover shows code G, with zero taxable unless the money went to a Roth IRA. Your IRA custodian reports the rollover on Form 5498, and you report the distribution on Form 1040 and note the rollover.
Related guides
If you also have a 401(k) with company stock, read about net unrealized appreciation before you roll the plan to an IRA. If a family member left you a workplace plan, see inherited 401(k). Federal workers can compare the TSP to IRA rollover, and to hold metals in an IRA, see our gold IRA rollover guide.
The bottom line
A 403(b) to IRA rollover can give teachers and nonprofit workers more investment choices, one account to manage, and control over investments. Use a direct rollover, match pre-tax money to a traditional IRA and Roth money to a Roth IRA, and weigh what the plan offers before you leave it.
Written by Tim Schmidt and reviewed for tax and account accuracy by Sean Webster, CPA. Last reviewed November 10, 2026 (America/New_York). This guide is for general education, not tax, legal, or investment advice, and not a recommendation to roll over or move any account. IRAInvesting.com is not a custodian, broker-dealer, plan administrator, tax preparer, or investment adviser. Talk with a licensed tax professional before you act, and confirm current rules on IRS.gov. Investing involves risk, including possible loss of principal.