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Thank's for your help. I am 54 years old. I am a nys local gov employee who will be retiring next year. I understand if I move my 457b to a 401k and take money out that I will be hit with the 10% penalty. If I move the money over and donot touch the principal but take what the 401k makes will that money be subject to the 10% penalty. Again thank you!

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Funds withdrawn from a government 457(b) plan are currently not subject to a 10% early withdrawal tax, a federal excise tax. Of course, the tax rules may change, so be watchful of this.

 

However, you are correct that if you roll over your 457(b) funds into a 401(k) plan, the 10% early withdrawal tax rules that apply to 401(k) plans will now apply to the 457(b) rollover funds coming in. But, you can still avoid the 10% early withdrawal tax if you become disabled, or if you sever from employment on/after age 55 (age 50 for public safety employees) and take a lump sum payment, if you spread the payments evenly over a long enough period of years, or upon death, or one of the rules that apply for avoiding the excise tax (see instructiond for line 2 of Form 5329 and IRS publication 575).

 

The same thing would happen if you roll the funds into an IRA, but the IRA rules do not have an age 55/50 severance exception for lump sums.

 

I am not sure what you are asking with regards to not touching the principal.

 

Bascially, anything not rolled over when withdrawn from the 457(b) plan is taxable income on the date withdrawn (other than any Roth deferral contributions made and their earnings but Roth is a separate discussion altogether), but the 10% federal excise tax for early withdrawals does not apply because 457(b) plans are exempt from that rule.

 

Government 457(b) plan accounts can be rolled over to IRAs or other qualified plans (to avoid the current taxation on the withdrawal, but to be taxed someday in the future). When such a rollover occurs, the 457(b) funds leave behind their 457(b) rules and exceptions and instead they take on the rules that apply to whatever type of arrangement they are rolled into. So if they roll into an IRA, the IRA rules now apply. If they roll to a 401(k), the 401(k) rules apply. If they roll to a 403(b), etc.

 

I hope this helps!

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Guest Joel Frank

Thank's for your help. I am 54 years old. I am a nys local gov employee who will be retiring next year. I understand if I move my 457b to a 401k and take money out that I will be hit with the 10% penalty. If I move the money over and donot touch the principal but take what the 401k makes will that money be subject to the 10% penalty. Again thank you!

 

 

Is your 457(b) peculiar to your employer or do you belong to the State's 457 Plan?

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Thank's for your help. I am 54 years old. I am a nys local gov employee who will be retiring next year. I understand if I move my 457b to a 401k and take money out that I will be hit with the 10% penalty. If I move the money over and donot touch the principal but take what the 401k makes will that money be subject to the 10% penalty. Again thank you!

 

 

Is your 457(b) peculiar to your employer or do you belong to the State's 457 Plan?

 

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Guest Joel Frank

Thank's for your help. I am 54 years old. I am a nys local gov employee who will be retiring next year. I understand if I move my 457b to a 401k and take money out that I will be hit with the 10% penalty. If I move the money over and donot touch the principal but take what the 401k makes will that money be subject to the 10% penalty. Again thank you!

 

 

Is your 457(b) peculiar to your employer or do you belong to the State's 457 Plan?

 

 

 

You have told us that you are a local government employee. Local governments are allowed to opt into the NY State Deferred Compensation Plan or adopt a plan of their own. What has your employer done? If your employer adopted its own plan please furnish a link to the plan's website.

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Thank's for your help. I am 54 years old. I am a nys local gov employee who will be retiring next year. I understand if I move my 457b to a 401k and take money out that I will be hit with the 10% penalty. If I move the money over and donot touch the principal but take what the 401k makes will that money be subject to the 10% penalty. Again thank you!

 

 

Is your 457(b) peculiar to your employer or do you belong to the State's 457 Plan?

 

 

 

You have told us that you are a local government employee. Local governments are allowed to opt into the NY State Deferred Compensation Plan or adopt a plan of their own. What has your employer done? If your employer adopted its own plan please furnish a link to the plan's website.

 

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Thank's for your help. I am 54 years old. I am a nys local gov employee who will be retiring next year. I understand if I move my 457b to a 401k and take money out that I will be hit with the 10% penalty. If I move the money over and donot touch the principal but take what the 401k makes will that money be subject to the 10% penalty. Again thank you!

 

 

Is your 457(b) peculiar to your employer or do you belong to the State's 457 Plan?

 

 

 

You have told us that you are a local government employee. Local governments are allowed to opt into the NY State Deferred Compensation Plan or adopt a plan of their own. What has your employer done? If your employer adopted its own plan please furnish a link to the plan's website.

 

 

Westchester County is with The Hartford which has a four percent guarantee in the fixed fund.

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Guest Joel Frank

Thank's for your help. I am 54 years old. I am a nys local gov employee who will be retiring next year. I understand if I move my 457b to a 401k and take money out that I will be hit with the 10% penalty. If I move the money over and donot touch the principal but take what the 401k makes will that money be subject to the 10% penalty. Again thank you!

 

 

Is your 457(b) peculiar to your employer or do you belong to the State's 457 Plan?

 

 

 

You have told us that you are a local government employee. Local governments are allowed to opt into the NY State Deferred Compensation Plan or adopt a plan of their own. What has your employer done? If your employer adopted its own plan please furnish a link to the plan's website.

 

 

Westchester County is with The Hartford which has a four percent guarantee in the fixed fund.

 

 

Here is yet another case where the officials of Westchester County (NY) are in bed with a broker/dealer. Westchester County should terminate its own plan in favor of opting into the State's Plan---one of the best in the entire Defined Contribution plan universe.

 

Did you know that your county government had this option?

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