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Withdrawal Options

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I am 56 and recently took early retirement. Some are suggesting that I take social security early at 62. I now have a 403b and also a Roth IRA. I am looking at trying to get some of the 403b money into the Roth IRA if possible. I would like to transfer as much as possible annually while staying in the 15% tax bracket. I know Roth IRA money is supposed to be earned income so I am asking around to make sure this move would be legal. The organization that I have the 403b and Roth IRA from thinks it is legal. Any thoughts out there?

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Hello

 

Once you are formally retired, yes you can move your money to a traditional IRA or a Roth but I think you will have to go to a traditional IRA FIRST. Its a good move if you are paying high fees in a bad 403b. No use keeping your money there if thats the case.

 

 

But keep in mind the 403b is tax sheltered money (I am assuming)so you will have to pay taxes on a transfer to a roth. reducing your amount upfront. Going the traditional IRA would allow you to transfer into good low cost funds and you would not be responsible for paying taxes until withdrawal.

 

If you are going from a roth 403b than you can do it !! with no upfront taxes being paid. I think but best to check with the irs

 

In terms of Social security, early withdrawal means lower benefits. You must evaluate if it makes more sense to take it early or possibly wait and get a bigger payout.

 

I 've read around and there seems to be a lot of conflicting info on this 403b-Roth transfer and some of it is wrong. What you are reading above is my understanding of it-I MAY BE WRONG TOO.

 

ANYONE WISH TO COMMENT?

 

 

Tony

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Guest Joel L Frank

I am 56 and recently took early retirement. Some are suggesting that I take social security early at 62. I now have a 403b and also a Roth IRA. I am looking at trying to get some of the 403b money into the Roth IRA if possible. I would like to transfer as much as possible annually while staying in the 15% tax bracket. I know Roth IRA money is supposed to be earned income so I am asking around to make sure this move would be legal. The organization that I have the 403b and Roth IRA from thinks it is legal. Any thoughts out there?

 

 

You may convert your pre-tax 403(b) to a Roth IRA. THIS IS A TAXABLE EVENT. AT YOUR AGE IT MAY NOT BE TO YOUR ADVANTAGE.

 

Joel

 

PS: Pre-tax money and Roth money both come from "earned income"

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A Roth IRA is not eligible to receive rollover contributions from employer plans. You can, however, roll over to a traditional IRA, then roll over the traditional IRA to a Roth IRA).

 

 

This is what 403bwise says similiar to what I had heard.

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I do understand it is taxable. Right now I am in the 15% federal tax bracket and 6% state tax bracket. Once I start collecting social security in addition to my pension, I would not have much cushion before my withdrawals would put me in an even higher bracket.

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Guest Joel L Frank

I do understand it is taxable. Right now I am in the 15% federal tax bracket and 6% state tax bracket. Once I start collecting social security in addition to my pension, I would not have much cushion before my withdrawals would put me in an even higher bracket.

 

 

You need not start Required Minimum Distributions from your 403b until you are 70.5. At your current age of 56 you have 14-15 additional years of tax deferral without making any withdrawal. Therefore, your 403b for at least 14-15 years has no impact on your tax bracket.

 

Joel

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I retired at 57 and rolled my tax defeered 403b7's AND tax deferred 457's to a traditional IRA without any difficulties. I did this in order to be with Vanguard, which I felt was to my advantage. I stressed over this but the actual paperwork was not a big deal, and it was smooth.

 

I could not roll over to a Roth, nor would I have wanted to. I do have Roths, but they're a different thing, as explained above.

 

I don't plan on touching Social Security, though, until I"m 70. I believe a way to calculate that is to see what percent of growth happens between 62 and 70, and decide if you can do better than that on your own. Not sure how to express that concept, sorry...

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Guest Joel L Frank

I retired at 57 and rolled my tax defeered 403b7's AND tax deferred 457's to a traditional IRA without any difficulties. I did this in order to be with Vanguard, which I felt was to my advantage. I stressed over this but the actual paperwork was not a big deal, and it was smooth.

 

I could not roll over to a Roth, nor would I have wanted to. I do have Roths, but they're a different thing, as explained above.

 

I don't plan on touching Social Security, though, until I"m 70. I believe a way to calculate that is to see what percent of growth happens between 62 and 70, and decide if you can do better than that on your own. Not sure how to express that concept, sorry...

 

 

Hi bzribee,

 

You don't plan on taking SS until age 70---so I assume at your tender age of 57 you will live on you CalSTRS pension plus your other pre-tax accounts. Why not take SS at age 62 if you are not working a job with a meaningful contribution to SS? Also I was under the impression that public workers in California do not pay into SS, am I right? If I am, your SS credits must come from other SS covered employment. Am I right?

 

Joel

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