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Two IRA questions

Chris Farrell Feb 8, 2012

Question: Hello! I listen to your show on my way to work as an RN on the night shift, where I contribute to an employee 403(b) match — 85 percent stocks and 15 percent allocation of assets. I am 35 years old and my husband is 37. He currently does not contribute to a 403(b) and his work does not offer one. I contribute a little more than the minimum to obtain my employer match. I also have a separate 403(b) through where I worked previously. We plan to work until normal age of retirement, good health withstanding.

My questions are: 1) Should we set up something for my husband that would be appropriate for us, or should we be adding more of my income to my employee 403(b) match and continue saving that way? 2) What should I do with my 403(b) from the previous employer — let it continue or roll over?Mary, Spring Lake, MI

Answer: Thanks for listening. I would contribute enough to take full advantage of your employer’s match. I would also have your husband set up an Individual Retirement Account or IRA. He might not be able to put much in at the moment, but even a small contribution helps.

On your second question, there is no real risk of leaving your previous 403(b) with your former employer. (I’m assuming your former employer is OK with it.) There are a lot of regulatory and legal safeguards, and most take seriously the responsibility of overseeing employee pensions. 

However, I usually recommend taking control of the money through a rollover IRA. After all, it’s your money and you’ll pay attention to it. You get to choose the investment company and investment options for the money, too. You’re not limited by the choices made by your former employer. 

There aren’t any tax consequences or penalties on a rollover so long as the money goes directly from your former employer into the rollover IRA account (which is why it’s also called a trustee-to-trustee rollover).

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