By Professor Pennywise

In last month's Academic Assets column, I began a discussion of rollovers, an option worth considering if you are leaving one university for another or retiring.

Rollovers occur when you move your tax-advantaged retirement assets from one financial-services provider to a new one. Such transfers are permissible only after you have left an employer. In a rollover, the money from your 403(b) retirement account is transferred into a traditional Individual Retirement Account, or IRA. That preserves your money's tax-advantaged status but changes the shell within which it is housed.

Rollovers may make sense for a variety of reasons:

Lower fees and costs. Expenses add up across a lifetime. To gauge the costs you are paying for the management of your assets, look at the account fees, if any, and expense ratios. TIAA-CREF, the dominant force in academic-retirement offerings, has low costs, but the index funds of even lower-cost providers, such as Vanguard, may be worth considering. People with nonacademic spouses in high-cost 401(k) plans should investigate rollover opportunities if your spouse changes employers, because retirement plans outside of higher education often have very high costs, making a rollover to a low-cost provider especially valuable.

More and better investment choices. Not everyone wants hands-on control of their asset allocation, but seasoned investors may find more opportunities to diversify—say, in small-cap companies or in international markets—within an IRA.

Simplified accounting. A single consolidated statement can give you a clear picture of your assets, simplifying accounting, taxes, and asset allocation. While holding all your assets at one provider may seem to cut against the basic investment rule of not putting one's eggs in a single basket, as long as the provider is a major, stable firm and the underlying investments are spread across a wide range of asset classes, such as international stocks, domestic stocks, bonds, cash, and real estate, a single provider should not compromise sound diversification.

The potential for Roth IRA conversion. A Roth IRA can be wise to hold for multiple reasons. It has, for example, the advantage of having no minimum distributions, so assets can build indefinitely until they pass to your heirs. Once your assets have been rolled over from your employer-connected plan to an IRA, you have the option, as do all IRA holders, of converting the traditional IRA into a Roth IRA, in whole or in part. That is worth weighing to determine if it makes sense for you.

A rollover may not be necessary or desirable, however. Before carrying one out, be certain you really want to switch providers. These questions are worth asking:

Am I satisfied with my current provider? If the investments have performed well, costs are within reason, and you are content, then why feel obliged to switch?

What benefits might I give up by switching to an IRA? There are certain circumstances in which a 403(b) or 401(k) might be more appropriate than an IRA. Those sometimes permit penalty-free withdrawals at age 55, for example, when 59 is the norm for IRAs. In general it would be advisable to leave retirement savings alone and let them grow, but, in some instances, early penalty-free access to your money might be important.

What particular investments might be sacrificed? Let's say, hypothetically, you contemplate moving assets away from TIAA-CREF. Think carefully before you do so. TIAA-CREF's retirement plans can be annuitized—converted into guaranteed-income streams for life—at low rates compared with most annuities. In its retirement plans, TIAA-CREF offers a Traditional Annuity that guarantees principal and interest that will keep pace with inflation—an impressive promise. The company offers a Real Estate Account that invests directly in commercial real estate, a good diversifier despite the sector's current plummet. Think about those things before giving them up for an IRA with conventional mutual funds.

Rollovers are not for everyone, nor need rollovers be total: Consider a partial rollover, taking some of the accrued assets elsewhere and leaving the rest with your current provider.

Pennywise recently decided to roll over all of his assets from TIAA-CREF to Vanguard, but that isn't necessarily a model. Everyone must weigh his or her own approach and situation.

If you do decide to roll over your assets, here is what you can expect to happen: You will fill out form upon form, at least if you are rolling over multiple accounts. Notarization will be required if a spouse is involved. You will have to tell your employer to notify the provider that your employment has terminated. Your employer will fail to do so. You will phone your employer again. More snarls, more phone calls, and then one day, mirabile dictu, the funds will magically float aloft and descend in a beautiful arc into your new account. You will rub your eyes in disbelief.

Well, that's what happened to Pennywise, anyhow. In plainer rendering, here is how to accomplish a rollover:

• Open the new IRA into which your money will roll over.
• Inform the custodian of your old account that you want a direct rollover into the new account. Do not simply withdraw the funds. That will result in penalties and taxes. Ask for a "direct rollover," with the check made out to the provider of your new IRA or, ideally, with the money transferred electronically.
• Ask your employer to verify your release from employment.
• Retain statements from both companies and note the rollover on your 1040 tax form. (If the transaction was done properly, the money will not be taxed, but the IRS wishes to know about the event.)

Your new provider should help with this process, ideally by putting a special handler on the case to help make things go smoothly with your old employer and provider. But expect complications. Be patient.

All of this is as easy as a baby rolling over—although if that sounds easy, you haven't watched a plump baby try it for the first time. But once upon a time, you were a baby, and you rolled over. You can handle a rollover, too, if you set your mind to it.

Professor Pennywise is the pseudonym for a professor in the humanities who has taught from the Pac-10 to the Big Ten. He is merely a frugal academic, not a financial professional. Note: Pennywise is seeking anecdotes and advice from academics, whether in the sciences or humanities, who have found second-income opportunities. Please send input to professorpennywise@yahoo.com.