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403(b) plans are retirement savings plans sometimes offered through state and local governments and municipalities, as well as some non-profit organizations. While it makes sense that an employee would jump onto whatever retirement vehicle their employer offers, this doesn’t mean that you have to remain with the same plan forever.
Many people start out with a 403(b) plan, then reallocate it into diversified assets that can include precious metals placed into a special type of IRA. In this article, we’ll review the essentials behind a 403(b) plan, then discuss how you can use your 403(b) to purchase metals like gold and silver through a Precious Metals IRA.
(To jump straight into how to roll over your 403(b), click here).
A 403(b) plan is a specific type of retirement plan that bears tax advantages, and that can be offered primarily to employees of 501(c)(3) tax-exempt organizations, public schools, and churches.
403(b)s were originally introduced in 1958 when Congress passed changes to the tax code. Public schools were the first to offer 403(b) plans to their employees in 1961, and when they emerged they were designed to just offer certain annuities. That restriction lent itself to the more common name of “tax-sheltered annuity plans” by which 403(b)s are still sometimes called.
A number of changes over the years have changed the shape of these plans somewhat. The Employee Retirement Income Security Act of 1974 (ERISA) forced all plans that offer employee-matching contributions to meet certain oversight rules. This, in effect, created two types of 403(b) offerings: one required to follow the ERISA guidelines and one that isn’t.
In 2005, under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the non-ERISA version of 403(b)s were finally given some protection against creditors.
The 403(b) plan is more common than you might think, with about one in five U.S. employees owning one.
A 403(b) can only be offered by a state or local government or a non-profit organization. This makes these plans popular offerings for employees at schools, universities, public hospitals, and libraries. There is one subtype of 403(b) designed for religious institutions as well, though it is far less common.
The 403(b) plan can offer several incentives to its owners.
You may see that 403(b)s look very similar to 401(k)s, but they do offer their own benefits and operate differently.
Congress has made slight changes to 403(b) plans over the years since their 1958 birth, including the ERISA and BAPCPA laws noted above.
Others like the recently-passed (as part of a recent appropriations bill) Setting Every Community Up for Retirement Enhancement Act (SECURE Act) have continued this trend. The SECURE Act loosened some rules about the types of annuities 403(b) plans can include, as well as raised the age for required minimum deductions (RMDs).
Some of the most critical rules and limitations of a 403(b) include:
The last, but possibly the most important, point that needs to be made here is not so much a rule, but a disadvantage. 403(b) plans, since they came about originally as only for annuities, offer very limited asset options: the conventional stocks, funds, and bonds.
Most 403(b) plans are administered by insurance companies. 401(k)s, on the other hand, tend to be run by mutual fund companies. This distinction is important because insurance companies have even less incentive to open up as many options for asset allocation, potentially limiting 403(b) plans further.
Precious metals such as gold, silver, platinum, and palladium can be valuable additions to a retirement portfolio. Unlike fiat currency and associated assets, precious metals benefit from carrying inherent value, with gold being perhaps the most popularly known example of material worth.
Historically, gold has been celebrated for its worth, from backing currencies through its use in jewelry. Precious metals like silver and platinum even serve industrial uses, and as such are wielded as powerful trade and economic tools. Investors worldwide follow the price fluctuations of precious metals as one measure of economic health and indicator of trends.
For individuals like you, here are some ways that precious metals can enhance your retirement savings.
As markets become more uncertain, the security and stability of assets like gold and silver can offer a safe haven not found elsewhere.
The set of retirement savings plans offered by employers is usually limited in the number of options available, and so employees will seize upon whichever plan is available. But remember, just because you started with a 403(b) plan doesn’t mean it’s the only retirement plan you can have.
Many individuals choose to reallocate some or all of their 403(b) plans into other retirement accounts, varying based on individual circumstances and retirement goals. One option is to roll over funds from a 403(b) into a Precious Metals IRA, giving you the potential benefits of diversification and stability mentioned earlier.
A Precious Metals IRA is actually a Self-Directed IRA, which is an IRS-approved type of retirement account that is not bound to the limited range of assets that a conventional IRA can hold (funds, stocks, and bonds), but goes beyond to hold alternative assets like precious metals. Knowing this can help you more easily navigate eligibility rules and rollover steps.
As long as it complies overall with IRS guidelines, each individual 403(b) plan can be written to have its own rules and stipulations. Therefore, the most accurate answer to the question of eligibility requires a case-by-case evaluation. Fortunately, Birch Gold pairs you with a Precious Metals Specialist who can help you determine whether your retirement account(s) are eligible for rollover.
One common caveat is also seen with 401(k) plans. You might not be able to roll over your 403(b) plan if you are still working for the employer who set you up with the account. And although with some retirement accounts being over the age of 59.5 gets this rule waived, this usually doesn’t happen in the case of 403(b) plans.
As you set up your retirement savings, we recommend you speak with a tax professional who can review your entire financial situation and give you up-to-date tax advice.
If you currently have a 403(b) plan that you’d like to roll over into a Precious Metals IRA, there are a few steps you’ll need to walk through. You will be paired up with a designated Precious Metals Specialist, who will be on hand to share your options, guide you through the process, and help you find the answers to any questions you may have.
There are a number of IRAs one in that position might consider, all eligible for 403(b) rollovers, such as Traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs. That means hard-saved money in 403(b) plans can be rolled into a Precious Metals IRA as well.
The steps are straightforward, especially when rolling over from a 403(b) plan:
At each step, your Birch Gold Specialist can guide you through everything you need to begin turning your 403(b) savings into gold.
Call us today at (800) 355-2116 with any other questions you may have, or to start a Precious Metals IRA.