How To Do a 403b Rollover to a 401(k), Correctly

Careers rarely move in a straight line. Sometimes you move up, sometimes sideways. If you’re transitioning from the nonprofit or public sector to the private sector, you’re not just navigating a new workplace culture — you’re entering a whole new world of financial benefits, especially when it comes to your retirement plan. One question we often hear from clients in this position: Should I roll over my 403b into my new 401(k)? In many cases, the answer is yes—and here’s why.

Understanding 403b and 401(k) plans

First, let’s define our terms. Both 403(b) and 401(k) plans are tax-advantaged retirement accounts offered through employers. The key distinction lies in who offers them:

• 403b plans are generally found in nonprofit organizations, public schools, and religious institutions.
• 401(k) plans are standard in the private sector.

Functionally, they’re similar. Still, 401(k) plans may often come with more robust investment options, lower administrative costs, and more consistent employer matching.

While there’s an estimated $1.26 trillion in 403b plans nationwide, 401(k) plans hold over $8.7 trillion¹. That sheer scale gives 401(k) plans more leverage to negotiate lower fees and offer a broader range of investment options. And while employer matching can happen with a 403b, it’s far more common and generous in 401(k)s — which means more “free money” toward your retirement.

403b rollover to 401(k): step-by-step

Step 1: Check your eligibility. Before anything else, confirm that your new 401(k) plan accepts rollovers. Most do, but it’s always worth double-checking.

Step 2: Choose the rollover method. You have two options here:

• Direct rollover (recommended): Funds are transferred straight from your 403b to your 401(k). You never touch the money, and there are no tax consequences.
• Indirect rollover: The 403b provider sends you a check, and you have 60 days to deposit it into your 401(k). Miss the window, and you could face taxes and early withdrawal penalties. (In most cases, this adds unnecessary complexity.)

Step 3: Initiate the process. Reach out to your 403b provider and let them know you’re rolling over into a new 401(k). They’ll give you the necessary forms and instructions. Your 401(k) administrator can guide you through the process from there.

A quick note on taxes

Handled correctly, a rollover should be tax-free. But if you accidentally trigger an indirect rollover and miss the 60-day deadline, you could owe taxes and penalties. If you’re unsure, it’s wise to loop in a tax advisor to help ensure a smooth transition.

After the rollover: What’s next?

Once the rollover is complete, it’s a great time to:

• Review your investment allocation to make sure it aligns with your long-term goals and risk tolerance.
• Maximize your contributions, especially if your employer offers a match.
• Simplify your financial life by consolidating accounts and reducing paperwork.

Changing jobs is a big move. However, it’s also a fresh opportunity to strategize about your financial future. By rolling over your 403b into a 401(k), you might be able to streamline your retirement savings, potentially lower your fees, and take fuller advantage of what your new plan has to offer — all while keeping your long-term goals front and center.

Reference: ¹  https://www.ici.org/statistical-report/ret_25_q1

This content is for informational and educational purposes only and should not be construed as individualized advice or a recommendation for any specific product, strategy, or course of action. Brighton Jones, its affiliates, and employees do not provide personalized investment, financial, tax, or legal advice through this communication. This material is not intended to, and does not, create a fiduciary relationship under ERISA or any other applicable law. For individualized advice tailored to your specific circumstances, please consult with your adviser.