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457 Withdrawal

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I have a friend who has a 457b through his employer (local governement). He is going through a divorce, but is not in danger of losing his house. He does not meet the requirements for a hardship withdrawal. He still asked to remove all of his money. He fully expected to suffer a heavy tax burden, but was shocked to learn that he can have the money. The adminsitrator stated that he can have it unless he quits or qualifies for a hardship. How can the federal government, local government, irs, or the vendor not return his money. He put all of it there and it is his money. I understand he should be taxed and penalized for early withdrawal, but not allowed to get the money. It is his. Can anybody explain this?

 

Jake

 

Just to be clear about the above post, they will not let him have his money.

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I have a friend who has a 457b through his employer (local governement). He is going through a divorce, but is not in danger of losing his house. He does not meet the requirements for a hardship withdrawal. He still asked to remove all of his money. He fully expected to suffer a heavy tax burden, but was shocked to learn that he can have the money. The adminsitrator stated that he can have it unless he quits or qualifies for a hardship. How can the federal government, local government, irs, or the vendor not return his money. He put all of it there and it is his money. I understand he should be taxed and penalized for early withdrawal, but not allowed to get the money. It is his. Can anybody explain this?

 

Jake

 

Just to be clear about the above post, they will not let him have his money.

 

The standard for a 457 Unforeseen Emergency is much higher than the hardships standard in a 403(b) account. Unforeseen Emergency is exactly what is say, you could not anticpate or foresee the problem.

I explain it to employees by saying you could not foresee a meteror hitting your house but you could foresee making a mortgage payment.

 

It goes back to when 457 plans were unfunded. Prior to Orange County CA going bankrupt in the 1990's these governmental plans were unfunded, meaning the employee deferred income but the employer did not have to actually establish an account for the employee. The employee became a general creditor of his employer for the value of his/her deferred comp (457) plan. Only after a number of OC CA employees lost their savings did the government require an actual contribution to the plan.

 

Most employees think all of these plans have the same rules, 401k, 403b or 457 but they don't for various reasons, most of them timing. It is time to have one universal dc plan with one set of rules.

 

 

 

 

 

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It is time to have one universal dc plan with one set of rules.

 

 

I agree and think that most reformers would agree. But there is such a powerful and well funded opposition to a single vendor plan (Spark Institute is one), as there is against the public health single care plan, that it will not happen because of political reasons.

 

 

 

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Hi Steve, I wanted to send this as a personal messege because I wanted you to answer this and the server wont let me in at the moment.

 

I met you at the LAUSD 403b advisory meeting several months ago... very interesting.... my name is Adam

 

I wrote away to a company claiming to give me a detailed account of how I could maximize my 403b. A rep came and she is from the LotterGroup www.fhri.org

 

She wants to see all my accounts with account #'s so she can run a deep "spectragraph" of my portfolios and then based on this finding show me how to maximize the money by using a "pyramid" investing graph and not the pie chart....

 

She explained that she collects her fee from the companies that we may use as a 403b , not from a % of my investment. Also, she will use an Insurance Co. as a lausd option... saying that with what she can "educate me" on that I wont have a problem with the Ins. Co. fee's because she will show me how Fidelity etc.. charges the same or more for a riskier? portfolio..... She 's then to come to my home with a collegue for a 2 hour education discussion....

 

Need a little help here....do I go ahead? Have you heard of these people or website? Any suggestions please.

 

Thanks

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