The case for rolling your Tuomey 403(b) into an IRA

For Tuomey Healthcare employees, there are new options available for your existing 403(b) due to the merger with Palmetto Health System. While the options can seem to be similar, the choice you make could have a significant impact on your retirement resources over the long term.

While all full time employees, with at least a year of service at Tuomey, will be eligible to participate in the Palmetto 403(b) and TSA plans with its more generous matching schedule, many are wondering about their options for their existing Voya 403(b) account. There are four options: Roll it into the new plan, Leave it where it is, Roll it into an IRA or Roth IRA, or Cash it out.

The idea of cashing your account in and getting your hands on the money in your account right now may sound very attractive. However, it will most likely be the most devastating long term choice you could make. Not only would the withdrawal be taxed - if you are under the age of 59 ½, you will face an additional 10% penalty. Not to mention that you are left to start all over again to build a tax deferred retirement savings account.

The idea of leaving your account where it is may be the simplest of your options. Voya is a well-respected insurance company who was once part of the ING Group, the Dutch financial conglomerate. You will not be able to add contributions to these accounts. Going forward, it is yet to be known what kind of service these accounts may receive as it will no longer be considered an active account with contributions going in. The accounts will likely continue to be serviced by the Voya office in Winston Salem, NC.

Rolling over your account to the Palmetto Retirement Plan may be attractive. By doing so, you will only have to worry about keeping up with one retirement account. The Palmetto Plan has some very good investment options with a broad selection of investment styles and allocations. Fidelity is a well-respected company, but it relies on online and telephone servicing. The only Fidelity Investment Centers in SC are in Greenville and Hilton Head, although there is one in Charlotte, which their website lists as the nearest to Sumter, SC.

So, with these options, why roll your account over to an IRA? There are four reasons – to maintain the tax deferral, more flexibility, more options, and local advice and counsel.

By rolling your 403(b) account directly to an IRA or Roth IRA, you will maintain the tax deferral benefit of your retirement account. There will be no tax impact for the rollover, if executed properly.

You will gain flexibility in an IRA that is not available or is difficult in a 403(b). For example: you are able to take money from an IRA to make a down payment on a first home and can qualify for a penalty exception, if you meet certain qualifications. That would mean that while you would owe taxes on the withdrawal, you would not have to pay an early withdrawal penalty. That exception does not exist for a 403(b).

IRA’s offer many more options than 403(b) plans. The typical qualified retirement plan offers anywhere from a dozen to several dozen investment options. The Palmetto Plan offers 31. In an IRA, the options are nearly unlimited. There are brokerage accounts, mutual fund accounts, insurance annuities, bank CDs, and more. This vast set of options allows you to customize your investment portfolio specifically for your situation and risk profile.

With so many options, how do you know what to choose? That’s where the local advice and counsel of an independent financial advisor comes in. If you chose to open an account with and get the assistance of a local professional, they can help you do an evaluation of your financial situation and risk tolerance and then customize a plan just for you.  They also should be able to help you going forward with your new Palmetto plan, and any other financial needs.

Axis Wealth Planning, LLC is a locally-owned company here in Sumter. Jonathan and his wife had both of their children delivered at Tuomey. He is well versed in not only the Voya Tuomey plan, but the Fidelity Palmetto Retirement Plan. As an independent firm, our only bosses are our clients. Please consider giving us a call so that we can help you evaluate your options in an unbiased process. We will help you evaluate your risk profile, create a simple plan for you, and implement it around your schedule. Most importantly, we are here to walk beside you and guide you along your financial journey.

Axis Wealth Planning, LLC does not offer tax or legal advice, please consult your tax or legal professional. We are not affiliated with Tuomey Healthcare, Palmetto Health System, Voya Financial, or Fidelity Investments.