Stagnant retirement plan? You have options

Don TaylorQuestionDear Dr. Don,
I have a 403(b) from a nonprofit organization I worked for many years ago. It is currently sitting in a money market fund with a balance of $1,580. Their annual custodial fee is $15, so this account never grows.

I want to move this money to my current 401(k) profit-sharing plan. Is there another option for me to transfer these funds somewhere where they would at least gain a little something?
-- Josephine Juncture

AnswerDear Josephine,
Odds are that you determined how the 403(b) money was invested, so you have to take some responsibility for it stagnating in a money market fund.

On the other hand, the stock market, as measured by the performance of the Standard & Poor's 500, was roughly flat over the past 10 years -- so you didn't miss out on much by sitting out in cash over that time period.

I have some money in a previous employer's 403(b) plan, even though I left that employer a decade ago. I can rebalance the portfolio and decide how the account is invested. I kept the money there to maintain low-cost access to the mutual funds offered within the plan. It also provides some diversification across mutual fund families for my overall retirement portfolio.

A profit-sharing plan isn't the same thing as a 401(k) plan, although it can be structured to include 401(k) contributions. You can roll the 403(b) funds into your current employer's 401(k) plan -- if the plan allows it -- or into a traditional or Roth IRA account.

The Bankrate feature "7 steps to a 2010 Roth IRA conversion" can help you decide between the IRA accounts. Keep an eye on fees. Work with your tax professional if you can't decide on your own.

In doing an IRA or Roth IRA rollover, you have to choose where to hold the account. Your choices are a bank account, a brokerage account or investing directly with a mutual fund.

Since you're looking for growth, you would probably skip the bank account option. You want to do a trustee-to-trustee rollover. Work with the new account provider to affect the rollover.

If you're just trying to find a new home for the $1,580, and your current employer's plan allows it, I'd recommend rolling the money into the plan. If you think you'll be contributing to the account over time, keeping the money separate in a traditional or Roth IRA account can make sense.

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