What to Do With Your 403(b) When You Retire From a New York Public School

When you retire from a New York public school, you generally have four main choices for your 403(b): leave it in the plan, roll it into an IRA, convert some or all of it to a Roth account, or begin taking withdrawals. Each option has different tax, investment, and long‑term planning implications. Understanding these choices can help you build a smoother, more confident retirement strategy—especially for educators in Westchester County, Dutchess County, NYC, and nearby Connecticut districts.

What Happens to a 403(b) at Retirement?

Unlike a pension, your 403(b) doesn’t automatically start paying you income. It simply “stays put” until you decide what to do with it. You can:

• Leave the money in your current 403(b) plan
• Roll it into a traditional IRA
• Convert it to a Roth IRA
• Take withdrawals as needed (subject to tax rules)

Most public school retirees choose a combination of these options over time, depending on income needs and tax planning strategies.

Pros & Cons of Rolling a 403(b) Into an IRA

Benefits of an IRA Rollover

• Greater investment flexibility: IRAs typically offer far more investment choices than employer 403(b) plans.
• Lower fees: Many retirees find that IRA platforms provide lower-cost options, especially for index funds and diversified portfolios.
• Simplification: Consolidating old retirement accounts makes it easier to manage withdrawal strategy and long-term planning.
• Better coordination with other goals: IRAs can integrate into broader investment management and income planning strategies.

Potential Drawbacks

• Loss of certain plan protections: Some employer 403(b) plans have unique creditor protections that IRAs may not offer.
• You must choose your own investments: Without a plan vendor making recommendations, retirees must take a more active role (or work with an advisor).
• Poor timing can create tax issues: Mistakes during rollovers—like taking a distribution instead of a trustee-to-trustee transfer—can create unnecessary taxes.

Tax Implications to Understand

Whenever you move or withdraw money from a 403(b), taxes should be part of the decision:

• Traditional 403(b) money is tax‑deferred: You will pay ordinary income tax when you withdraw it.
• A direct rollover to a traditional IRA is not taxable: Done properly, this moves money without triggering income tax.
• Roth conversions are taxable: You pay tax now in exchange for tax‑free withdrawals later.
• Withdrawals before age 59½ may incur penalties: Though certain exceptions apply for separation from service at age 55+

Because these rules can get complex, many educators work with a professional specializing in tax planning to help determine the most efficient timing.

Required Minimum Distributions (RMDs)

RMDs apply to your traditional 403(b) and traditional IRAs starting at the federally mandated age. Here’s what retirees need to know:

• Both IRAs and 403(b)s require RMDs.
• RMDs add taxable income to your return each year.
• Roth IRAs do not have RMDs —this is why some retirees strategically convert funds earlier in retirement.

If you have multiple 403(b) accounts, you can usually take the RMD from just one. IRAs, however, follow different aggregation rules. Coordinating these withdrawals is an important part of long-term planning.

Investment Flexibility Differences

One of the biggest differences between staying in a 403(b) and rolling into an IRA is the level of control you gain over your investments.

• 403(b) plans: Limited fund menus, often with higher fees and fewer index fund choices.
• IRAs: Broad access to ETFs, mutual funds, individual bonds, and professionally managed portfolios.

For many retirees in Rye, NY and Westchester County, the broader flexibility of an IRA supports a more customized retirement strategy—especially when integrated with professional investment management.

Common Rollover Mistakes to Avoid

• Taking a distribution instead of a direct rollover, which can trigger immediate taxes and penalties.
• Ignoring fees —many retirees don’t realize how much their 403(b) is costing them.
• Not coordinating with Social Security and pension income, which can push you into a higher tax bracket.
• Missing the chance for Roth conversions in early retirement before RMDs and Social Security begin.
• Leaving accounts scattered across old districts and vendors, complicating long-term planning.

How Focus Financial Group Supports Public School Retirees

Based in Rye, NY, Focus Financial Group helps public school employees understand how 403(b) rollover decisions affect taxes, investments, and retirement income. For educators in Westchester County, Dutchess County, NYC, and nearby Connecticut communities, we offer a coordinated, personal approach to retirement planning.

Our team can help you evaluate your 403(b) rollover options, integrate them into your full financial plan, and avoid the common pitfalls that cost retirees money over time.

Ready to Make a Smart 403(b) Decision?

If you’re retiring from a New York public school, your 403(b) is one of your most important financial assets—and the decisions you make in the first few years of retirement can have a lasting impact.

Schedule a rollover consultation today and start your retirement with clarity and confidence.