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What Is My Maximum Allowable Annual 457(b) Withdrawal?

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I will retire this year at Age 56 from State Gov't Service and will rollover my employee SERS contributions into a 457(b) plan administered by our Deferred Compensation outfit. Amount transferred will be about $94,000. I need an additional $450 net monthly to supplement my regular monthly annuity. Since the 10% early withdrawal penalty does not apply to 457's, is there a limit on the amount of my annual 457 withdrawal? I also understand that monthly withdrawals are also permitted from a 457(b) account. Is this correct? For months I was researching traditional IRA rollovers and fees and 72(t) withdrawals and Federal Midterm rates to plug into a 72(t) calculator, but now I understand that all this is not necessary. Since I am under age 59.5 and wish to make annual withdrawals, is a 457(b) account still subject to a 72(t) calculation?

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You can withdraw the entire portion of your 457 account without penalty. You will, however, pay ordinary income tax on the full withdrawal.

 

Since there is no penalty, 72(t) does not apply here.

 

You can take out as much or as little as you want from your 457 now that you have separated from service.

 

Congrats on retirement!

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Guest Sierra

I will retire this year at Age 56 from State Gov't Service and will rollover my employee SERS contributions into a 457(b) plan administered by our Deferred Compensation outfit. Amount transferred will be about $94,000. I need an additional $450 net monthly to supplement my regular monthly annuity. Since the 10% early withdrawal penalty does not apply to 457's, is there a limit on the amount of my annual 457 withdrawal? I also understand that monthly withdrawals are also permitted from a 457(b) account. Is this correct? For months I was researching traditional IRA rollovers and fees and 72(t) withdrawals and Federal Midterm rates to plug into a 72(t) calculator, but now I understand that all this is not necessary. Since I am under age 59.5 and wish to make annual withdrawals, is a 457(b) account still subject to a 72(t) calculation?

 

 

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You got off the right track. Due to your age, your $94,000 SERS distribution is subject to the 10 percent penalty tax. Do not roll it over to your 457(b) because 457(b) is exempt from the 10 percent tax. For recordkeeping purposes roll it over to an IRA and establish a SEPP Plan under section 72(t) to be exempt from the 10 percent tax on withdrawals made prior to age 59-1/2.

 

If the balance in your 457 is enough to sustain withdrawals of $450 per month, until at least age 59-1/2, then you do not need a SEPP for your IRA.

 

Peace and Hope,

Joel L. Frank

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Guest Sierra

 

I will retire this year at Age 56 from State Gov't Service and will rollover my employee SERS contributions into a 457(b) plan administered by our Deferred Compensation outfit. Amount transferred will be about $94,000. I need an additional $450 net monthly to supplement my regular monthly annuity. Since the 10% early withdrawal penalty does not apply to 457's, is there a limit on the amount of my annual 457 withdrawal? I also understand that monthly withdrawals are also permitted from a 457(b) account. Is this correct? For months I was researching traditional IRA rollovers and fees and 72(t) withdrawals and Federal Midterm rates to plug into a 72(t) calculator, but now I understand that all this is not necessary. Since I am under age 59.5 and wish to make annual withdrawals, is a 457(b) account still subject to a 72(t) calculation?

 

 

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

 

You got off the right track. Due to your age, your $94,000 SERS distribution is subject to the 10 percent penalty tax. Do not roll it over to your 457(b) because 457(b) is exempt from the 10 percent tax. For recordkeeping purposes roll it over to an IRA and establish a SEPP Plan under section 72(t) to be exempt from the 10 percent tax on withdrawals made prior to age 59-1/2.

 

If the balance in your 457 is enough to sustain withdrawals of $450 per month, until at least age 59-1/2, then you do not need a SEPP for your IRA.

 

Peace and Hope,

Joel L. Frank

 

 

The above solution is NOT required. I have done some research for you.

 

You may use the 457 plan to accept the $94,000 from the SERS. The new 457 balance will now consists of 457 funds and 401(a) funds (SERS). All withdrawals from the consolidated account will be exempt from the 10 percent penalty tax because the 457 funds were always exempt and the 401(a) funds were withdrawn from SERS after you separated from service during or after the year you turned age 55. You will now direct the 457 Plan Administrator to direct deposit $450.00 to your checking account. As you know the $450.00 will be taxable on the federal level at ordinary rates. Good luck and go fishing!!!

 

Joel L. Frank

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