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sheryl

Transfer 457 Funds

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I retired effective May 1, 2008 from my county government job. I have a pension and also two 457 funds: one at the State 457 fund and one at the county 457 fund. Would it be in my interest to rollover these funds into an IRA? Right now, I have the funds in a stable account, but the local financial advisor says taking these funds into an IRA would give me more options. Need some ideas. I am only 56.

 

Thank you for your input.

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Hi sheryl,

The key here is your knowledge of the options available (not only from your advisor) and what constitutes your best interests. The red flag is that it was your adviser who said that you could have more options. No adviser will recommend this without some compensation and or is selling and leading you to another expensive product. Compensating the adviser is fine as long as you KNOW what exactly how much you are paying him or her to to roll over your 403b into an IRA and how much the costs are year after year after moving. Nobody is twisting your arm to change right now until you know what is going on first.

Please do not believe that your advisor is doing this for free, they are not. Sounds like your are satisfied with what you have right now.

Just my 2 cents worth,

Steve

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Do you want to use any of the 457(b) money before you reach age 59.5?

 

If yes, then be careful. If you roll over to the IRA, then the 10% excise tax will likely apply to the withdrawals made before age 59.5.

 

However, taxable withdrawals (amounts not rolled over) taken directly from the 457(b) plan, regardless of age, are not subject to the 10% excise tax. So to avoid the 10% excise tax, do not roll everything to an IRA, but consider leaving some in the 457(b) plan until you reach 59.5.

 

Of course, if you don't expect to need any of it before age 59.5, then the rollover option would be worth looking at if you feel your investment options in the 457(b) plan are inadequate for your investment portfolio needs.

 

Say, that 10% hit seems fairly important, doesn't it? Did the local financial advisor educate you about that issue? If not, then we're glad you asked here.

 

Keep in mind, the investment 'options' available in an IRA are also the path to commissions for the financial advisor (that's okay, just be aware of what's going on in their mind and don't be afraid to ask how they get paid and how much it is, because it comes out of your money). In this case, IMHO, seeking the advice from a tax advisor (after having heard from the financial advisor) would be a reasonable course of action.

 

I hope this helps!

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Thank you everyone that provided some information to ponder.

 

All of you gave me food for thought on how to proceed.

 

Now to calm the financial advisor to wait a little bit.

 

 

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