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Should I convert my 403(b) account to a traditional IRA?

I am 64 years old and just retired. I have a 403(b) from my education career. My advisor is suggesting that I convert the 403(b) to a traditional IRA account with an annuity company. I understand that I would have to always ask my third party if I wanted to withdraw from my 403(b). With the IRA it is more controlled by me. Is this good advice? There are no fees associated with the IRA.

Career / Compensation, Retirement, Annuities, Choosing an Advisor, IRAs
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October 2018

Congratulations on your Retirement and thank you for serving through Education. 

While there is good reason to move your 403(b) to an IRA, I would use caution in moving ALL of it to an annuity company.  There are several types of Annuities and several more annuity companies.  All come with different bells and whistles.  I am in favor of moving your money away from the 403(b).  I am not yet sold on the idea of moving it to an annuity company.  

Lets dig deeper.

Most annuities are like a Swiss Army knife, they do many different things.  Unfortunately, many don't do anything one thing very well. Moreover, Insurance "Fat Cats" make a big commission and often push the product that best benefits their pockets with little to no regards to your solution.  Lets focus on your solution...  

Define Your monies "Clarity of Purpose"

Ask your self, what is the money for?  

In choosing what to do with your money I suggest defining a clarity of purpose of your money.  Most people who ask "should I convert my 403b account to a traditional IRA" are often looking for clarity on income planning or solving for the income gap.  

Ask your self, "what am I solving for?"  It is likely one of the three.

  1. Solving for the Income Gap 
  2. Solving for Growth 
  3. Solving for Legacy 

If you are solving for the income gap, you can use the best annuities or fixed income solutions out there that give you the most income with the lowest amount of money to guarantee your income need.  You may find that the best income annuities may have no fees, or reasonable fees that make the benefit worth while.  Some annuities pay no commission and are a Flat Fee of $250 annually regardless of your balance.   

How To Best Solve for the Income Gap 

Define your Annual Income Goal (AIG):

Subtract your Guaranteed Annual Income (GAI)

(i.e. Social Security, Government Pension, other income):

The formula looks like this:          AIG - GAI = Retirement Income Gap

for example, you need $100,000 in retirement and your Guaranteed Annual income is $75,000...

$100,000 - $75,000 = a Gap of $25,000 

You are solving for an income solution of $25,000 and are best to do this with the least amount of your retirement money.  


With love and regards,


Jose Sanchez, CFP®

October 2018
October 2018
October 2018
October 2018