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From a 403(b) to a 401(k)
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August 18, 2000: 10:24 a.m. ET
New job, new retirement plan, so how do you make the most of both?
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NEW YORK (CNNfn) - Switching jobs is hard enough, but you'll also need to consider what to do with your old retirement plan. If you leave a non-profit organization, should you combine your 403(b) plan with your 401(k) at your new job?
In response to a reader's question, Larry Johnson, a certified financial planner from Itasca, Ill and a member of the Financial Planning Association, said you can leave your money in the 403(b) or do an IRA Rollover.
Ask the experts a question
I recently moved from a non-profit job to a for-profit company. But my retirement plans are different. I had a 403(b) in my old job and now I'll have a 401(k). I tried moving all of my funds from the 403(b) into the 401(k), but was informed by the plan that I can't because of federal regulations. I have about $30,000 in the 403(b). I am 28 years old. So, what should I do to maximize compound interest of that lump sum? Move it into an IRA? Leave it there? Something else? I feel bad/frustrated that I have to start all over again in a 401(k).
First, it is important that you consider this 403(b) in the context of your entire portfolio and not just by itself. A 403(b) is a retirement plan that non-profit organizations use that is similar to a 401(k) plan.
If you are like many people, this retirement plan may be a significant part of your portfolio. You have a long time horizon, probably up to 50 or more years. Many people mistakenly think that their investment timeframe is only until they retire, even though you will hopefully live (and therefore need the money invested) for up to 30 years after you retire.
You don't really have to "start all over again." Depending on the investment choices inside your old plan, you may want to just leave it there. As an alternative, you can consider rolling it tax-deferred into an IRA Rollover with a mutual fund or brokerage company.
Consider the new options in the 401(k) with the old plan so that they all become part of the same integrated portfolio. A diversified portfolio comprised mostly of growth stock investments will hopefully give you the best long-term results. Chances are your 403(b) was probably invested in mutual funds, which are pooled accounts invested by professional money managers with specific investment objectives.
Look for funds that have long-term track records, solid Morningstar ratings, low expenses and stable management.
As you look at different investment options, remember that most areas of the stock market are at or near all-time highs. Therefore, you may want to consider dollar-cost-averaging your money (assuming you roll it over into an IRA) into the mutual funds that you choose over a six to twelve-month period.
Dollar-cost averaging places equal amounts of money from the money market fund to the stock fund in periodic installments (usually monthly). If the market corrects, then these equal investments would buy more shares as the market goes down.
This would allow you to accumulate a greater number of shares for when the bull market would eventually resume. Dollar-cost averaging is a good strategy if you feel there is a chance that the market could decline from current levels in the near future.
Since your new plan will most probably be payroll deducted, it will get the benefits of dollar cost averaging automatically. 
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