You just retired. Your Plan 3 money is sitting with the state of Washington, and now you have a choice to make. Do you leave it right where it is, or do you move it somewhere else, like an IRA? This question comes up all the time for people in PERS 3, TRS 3, and SERS 3, and there is no single right answer for everybody. But there are some clear facts that can help you decide what is best for your own situation.
In this post, we will walk through what your Plan 3 options look like, how they compare to an IRA, and how fast you can get your hands on your own money in each case. By the end, you should have a clearer picture of which path fits your goals.
What Is Plan 3, and Why Does This Question Come Up?
Plan 3 is one of the retirement plans offered to Washington state employees, and it works a bit differently than Plan 2. Part of your Plan 3 money grows in a pension-style account, and part of it grows in an investment account that you help direct. Once you retire, that investment portion does not have to stay with the state. You get to choose where it lives next.
That choice matters a lot, whether you are in PERS 3, TRS 3, or SERS 3. The rules and the fund menu are basically the same shape across all three systems, so this decision applies no matter which one you belong to. Let’s look at your two real options.
Your Two Choices When You Leave Plan 3 Money
When you retire, you generally have two paths for your Plan 3 investment funds. You can leave the money right where it is, inside the state’s plan. Or, you can roll it over into an account you control, like an IRA. Let’s break down what each one looks like day to day.
Option 1: Leave It With the State
If you leave your money in Plan 3, you keep using the same menu of choices you had while you were working. That menu includes the TAP fund (a fixed annuity-style option), seven other self-directed funds, and a handful of target date funds built around your expected retirement year. That is the entire list. There is nothing else to pick from.
For some retirees, that short list is actually a feature, not a bug. It is simple, it is familiar, and there is no decision fatigue. But for many others, it starts to feel limiting once they are no longer working and want more say over how their money is invested.
Two of those Plan 3 pieces are worth explaining in plain terms. The TAP fund works like an annuity: it pays a set rate, and it does not go up or down with the stock market. A target date fund is a bundle of investments that is already built around the year you plan to retire, so it slowly shifts to be more conservative as that year gets closer. Both are designed to be simple, hands-off choices, which is exactly why they only give you a handful of settings to work with instead of full control.
Option 2: Roll It Into an IRA
Your other option is rolling that money into an IRA of your own. Instead of a handful of funds, you suddenly have access to tens of thousands of investment choices. That includes index funds, individual stocks, bonds, and just about anything else you might want to hold for retirement.
A rollover like this is not a taxable event when it is done correctly, since the money moves directly from one retirement account to another. The main trade-off is that you (or an advisor you choose) now become responsible for picking the investments, instead of the state doing it for you within that narrow menu.
Why More Choices Can Mean Better Diversification
Diversification just means not putting all your eggs in one basket. The more good baskets you have to choose from, the easier it is to spread your money around in a way that matches your own comfort with risk. Here is a simple side-by-side look at what each option offers.
| Feature | Staying in Plan 3 | Rolling Into an IRA |
|---|---|---|
| Number of investment choices | About 9 (TAP fund, 7 self-directed funds, target date funds) | Tens of thousands |
| Who manages the fund menu | The state | You, or an advisor you hire |
| Ability to fine-tune risk level | Limited to the funds offered | Highly flexible |
| Customer service hours | State business hours only | Typically larger service centers, more availability |
With only nine or so choices inside Plan 3, you are stuck picking from what is on the shelf. With an IRA, you can build a mix that is tailored specifically to your own risk tolerance and goals, which for many retirees means the chance at lower risk and better long-term returns at the same time.
How Fast Can You Actually Get Your Money?
Diversification is not the only thing to think about. Access speed matters too, especially once you are retired and might need money for an emergency, a big purchase, or just everyday bills. This is one area where Plan 3 and an IRA can look very different.
If your money is with the state and you need to pull cash out of the TAP fund, you could be waiting up to 60 days before it lands in your account. If your money is in one of the self-directed funds instead, it is usually faster, often a week or two, but you are still waiting on a processing team to handle it.
With an IRA, most custodians let you set up a simple electronic transfer using a voided check on file. Request the money, and it typically shows up by direct deposit within a couple of days. There is also usually a real person you can call to check on the status, rather than waiting on a back-office team you cannot reach directly.
| Withdrawal Source | Typical Time to Receive Funds |
|---|---|
| TAP fund (Plan 3) | Up to 60 days |
| Self-directed funds (Plan 3) | About 1-2 weeks |
| IRA (direct deposit) | A few days |
If having quick access to your own money is important to you in retirement, that speed difference is worth taking seriously. Sixty days can feel like a very long time if you have an unexpected expense show up.
A Quick Example: Two Retirees, Two Choices
Picture two coworkers who retire the same month. One is in PERS 3, the other is in TRS 3, and both have the same amount sitting in their Plan 3 investment account.
The PERS 3 retiree decides to leave the money right where it is. He keeps his balance split between the TAP fund and a target date fund, and he likes not having to think about it. A few months later he needs a chunk of cash for a home repair, and he learns the TAP fund portion could take up to 60 days to reach him.
The TRS 3 retiree chooses to roll her balance into an IRA instead. She works with an advisor to spread the money across a wider mix of funds than Plan 3 offered. When she needs cash for a similar repair a few months later, she requests a withdrawal and has it in her bank account within a few days.
Neither retiree made a wrong choice. One valued simplicity and was fine waiting longer for cash. The other valued speed and a wider set of fund choices, and was comfortable managing (or paying someone to manage) an account on her own. The right answer depends on what you value most.
Who Should Manage the Money After You Move It?
Rolling your money into an IRA does come with a catch. Once it is out of Plan 3, you are the one in charge. That means you are responsible for choosing the investments, keeping up with the tax rules, and managing the account year after year.
Opening an IRA yourself is simple and often low-cost. A quick search will show you plenty of places to open one. But simple to open does not always mean simple to manage well over the next 20 or 30 years of retirement.
Some retirees are happy handling that on their own. Others would rather hand that job off to a financial advisor who manages the investment selection, watches the tax code for them, and keeps an eye on the account long term. Neither choice is automatically right or wrong. It comes down to how much time, interest, and confidence you have for managing it yourself.
It is also worth remembering that a lower-cost, do-it-yourself approach usually means less hands-on help. That can work out fine, but it also raises your exposure to costly mistakes, like missing a required withdrawal, taking money out in the wrong order, or letting an old beneficiary form sit unchanged for years. A higher advisory fee, on the other hand, more often reflects ongoing planning and someone actively watching for those exact problems. The point is not that one is better than the other; it is to know exactly what you are paying and exactly what you are getting for it.
What This Means for PERS 3, TRS 3, and SERS 3 Members
This entire comparison applies whether you are a PERS 3 member, a TRS 3 member, or a SERS 3 member. The investment side of Plan 3 works the same basic way across all three systems, so the TAP fund, the self-directed fund options, and the target date funds all show up the same way no matter which system you belong to.
That means a PERS 3 retiree, a TRS 3 retiree, and a SERS 3 retiree are all weighing the exact same trade-off: stay inside a short, state-managed list of funds, or roll the money into an IRA with far more choice and typically faster access to your own cash.
If you want help thinking through which path fits your own retirement plan, we work with WA state employees on exactly this kind of decision every day. You can schedule a personal meeting here and we will walk through your specific numbers together.
Frequently Asked Questions
Is rolling Plan 3 money into an IRA a taxable event?
No, as long as it is done as a direct rollover from Plan 3 into a traditional IRA. The money moves straight from one retirement account to another without passing through your hands, so it does not trigger income tax at the time of the transfer.
Do I have to move all of my Plan 3 money at once?
Rules can vary depending on your exact situation and timing, which is why it is worth checking your options with the Department of Retirement Systems or an advisor before you initiate a rollover. In many cases retirees do move the full investment balance at once, but you should confirm what applies to you specifically.
Does this apply to my Plan 3 pension benefit too?
No. This decision is only about the investment portion of Plan 3, the part you helped direct into funds like the TAP fund or the self-directed options. Your separate pension benefit from Plan 3 is not something you roll into an IRA.
Is it always better to move the money out of Plan 3?
Not necessarily for everyone. Some retirees prefer the simplicity of Plan 3’s short fund list and do not mind the slower access to cash. The right choice depends on how much control you want, how quickly you may need access to your money, and whether you plan to manage the account yourself or work with an advisor.
P.S. If you are trying to decide whether to leave your Plan 3 money with the state or move it into an IRA, you do not have to figure it out alone. Come join our free community, where we share resources and courses built specifically for Washington state employees planning their retirement.
