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I worked for an educational institution for a few years, and while there contributed a few thousand dollars to a TIAA-CREF 403(b). When I left that job a year ago and went to work in the private sector, I left the money in that account, since I was told that I could not roll it over into the 401(k) my new employer provided. I was recently told that what I should have done instead was roll the funds in that account into an IRA, instead. Before doing this, however, I want to make sure that I understand the relevant issues.

As I understand it, then, I wouldn't incur the early withdrawal penalty so long as I put the disbursement from the 403(b) into an IRA within 60 days; my current salary, however, is higher than the cutoff for the traditional IRA, so I would have to go to a Roth IRA. Would the 60 day period be affected by the fact that the transfer was to a Roth? Also, my current employer is not matching contributions to my 401(k) yet, so I was planning on contributing to a Roth this year; would the rollover affect my ability to contribute? Also, I assume that I would have to pay taxes on the Roth rollover, since otherwise I would be getting tax-exempt pre-tax savings; would this be at the rate I should have paid when I was contributing to the 403(b), or the rate I pay now?

And, finally, what advantage would I be gaining from rolling over to an IRA in the first place? I anticipate my salary increasing enough before retirement to make the change from tax-deferred to tax-exempt post-tax savings worth it, but in terms of accessibility of funds, etc., is there any reason to switch? (That is, did the person who originally told me to roll the funds over to an IRA, not knowing that I would have to go to a Roth, know what they were talking about?)


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