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whyme

457B Rollover To Ira Question

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I understand that the rules re: penalty-free withdrawals from 457 plans are different from 403b/401k plans. What I'm not clear about is whether money from a 457b plan can be rolled over (without penalty or tax) to a trad IRA, if one is still employed by the district whose 457 plan it is. Can the money be rolled at any time, or at 59 1/2, or only upon separation from employment, or what? Thanks in advance.

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Guest adirondacks

whyme:

 

You must satisfy a triggering event to effectuate a rollover from a pre-tax 457(b) account to a traditional IRA. They are: DEATH, (only the surviving spouse, if the named beneficiary, has this right); SEPARATION FROM SERVICE/RETIREMENT; PERMANENT DISABILITY, ATTAINMENT OF AGE 59-1/2.

 

Best,

 

Joel

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Thanks, Joel. So, just to be clear: at age 59 1/2, the assets can be rolled into an IRA, even if one is still employed by the district, same as with the 403b, have I got that right?

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Guest adirondacks

Hi Bob,

 

I think you are confusing age 70-1/2 when Required Minimum Distributions must start with the earliest date upon which an in-service employee may effectuate a rollover contribution to an IRA or other eligible plan.

 

Joel

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Shirley (Bob?) is correct. There is no in-service withdrawal option under Code Section 457 or under the 457(b) regulations that list the attainment of age 59.5 as an in-service withdrawal option.

 

Some 457(b) plans are written to allow for small balances to be distributed (one time only) if certain conditions are met - but that's probably not what the OP is looking for here.

 

Under a 403(b) plan, profit sharing plan, 401(k) plan, yes, you could have a withdrawal at age 59.5 if the written plan document allows, regardless of the amount.

 

Also note the difference between a 457(b) plan maintained by a government vs. a not-for-profit corporation: The govermental plan can allow rollovers to an IRA when a withdrawal event is reached and the participant will receive a Form 1099-R for the rollover. But a distribution from not-for-profit's plan cannot be rolled - the participant will actually receive a W-2 - you can't rollover W-2 income!

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Guest adirondacks

John;

 

Welcome back---it's been a long time---I'm glad I errd!

 

Bob,

 

I stand corrected! Thank you!

 

OBSERVATION: Assume to lousy line-ups. The guy with both the 403(b) K-12 and the 457(b) also K-12. The guy intends to retire after age 70. With the 403b he can rollover at age 59-1/2 while he must incur the abuse for 11 more years before he can rollover his 457(b). This shows just how essential the institutional class of shares is. It makes the age at rollover not that important.

 

Happy New Year!

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Bob and John,

 

Thank you! I had encountered contradictory information about this, which precipitated my post. An unnecessarily confusing law, as far as I can see. (Not that there is any great reasoning behind the magic age of 59 1/2.) And yes, Joel is right about the implication of this for teachers: in my case the 457 offerings, which I evidently won't be able to roll over until retirement, are more limited and higher cost (wrap fees as well as fund expenses) than the best of the 403b options in my district. Practically speaking, I don't think that many teachers manage (or can afford) to take advantage of both; the good news for me in this rollover context is that my 457 is a relatively small account, about 5% of my retirement investments.

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Guest adirondacks

Whyme;

 

May I suggest you make a public statement at the next regular meeting of your Board of Education. Distribute a fact sheet on Tibble. Tell them they are inviting a lawsuit if they did not perform their due diligence prior to placing retail class funds on the 457b/403b investment menus. We must spread the word of Tibble.

 

Happy New Year,

 

Joel

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Guest adirondacks

Bob, another major positive difference between 457(b) and 403(b) plans is the 10 percent federal excise tax does not apply to withdrawals from 457(b) plans.

 

Happy New Year,

 

Joel

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