457 to IRA rollover - withdrawal restrictions

[Lakewood90712]

Looking to start moving my pretax 457 funds to a either a ira or roth ira.

Am over 59 1/2 and all 457 contributions were made over 5 years ago.

Question, If I do move to an ira and then need the money to purchase a residence, is there a restriction on withdrawls without penalty? Somewhere I have hers 5 years ?

 

[pb4uski]

Be careful. If you move/rollover pretax money to a Roth IRA the amount moved will be taxable income in the year that it is moved. If you move it to a regular IRA it is not a taxable event.

Also, if the money is moved to a Roth IRA that has not existed for 5 years, there will be tax on the earnings but otherwise tax free... but earnings are last so that provision may not apply.

 

[38Chevy454]

Agree with PB. With respect to the withdrawal for potential house purchase. I am assuming the 457 is pre-tax money and you are doing a rollover to a pre-tax IRA, so you will not have any tax on the conversion of 457 to IRA. The withdrawal of the funds out of the now IRA for house or whatever use will have no penalty, but will have standard tax rate consequences as it will be considered as income for tax purposes.
The 457 does allow for penalty free withdrawals before 59.5, the regular 10% penalty does not apply like it does for 401k/403b/IRA withdrawals prior to 59.5. Excepting if you are doing 72t, but for purposes of the discussion leave that since it does not apply to your question.
The key factor for you is being over 59.5 eliminates the 10% penalty, but like any withdrawal from a pre-tax retirement savings account it will have tax due based on total income for the year.

 

[Lakewood90712]

What I am contemplating is moving pretax 457 funds to a roth ira , maxing out the 12% fed tax rate each year. I'm over 59 1/2 so I can withdraw from the 457w/o peanlty.

Somehow I got the idea that any roth ira contributions must stay for at least 5 years , reguardless of age to avoid a penalty.

This 457 plan also has a 457 roth available ,however does not allow transfers to it, only new contributions from those still employed.

 

[pb4uski]

Unless the 457 plan has an attractive stable value fund or some really attractive fund options that are not available in an IRA, I would consider rolling the entire 457 into an IRA and then just do withdrawals from that and periodic Roth conversions to the top of the 12% tax bracket as planned.

 

[Lakewood90712]

Unless the 457 plan has an attractive stable value fund or some really attractive fund options that are not available in an IRA, I would consider rolling the entire 457 into an IRA and then just do withdrawals from that and periodic Roth conversions to the top of the 12% tax bracket as planned.

This 457 does have a good stable value fund, decent index funds an a carve out to buy stocks, and funds thru schwab personal choice. Low custodian fees.

Many of the city finance beaurocrats have a big say in the plan, as thier personal money is in it. As oposed to the " train wreck " financial management in thier jobs running city finances. Amazing what happens when you have skin in the game.

I dont know if the reason for no transfers from the pretax 457 to roth 457 is not allowed. might be IRS rules.

 

[pb4uski]

This 457 does have a good stable value fund, decent index funds an a carve out to buy stocks, and funds thru schwab personal choice. Low custodian fees.

Many of the city finance beaurocrats have a big say in the plan, as thier personal money is in it. As oposed to the " train wreck " financial management in thier jobs running city finances. Amazing what happens when you have skin in the game.

I dont know if the reason for no transfers from the pretax 457 to roth 457 is not allowed. might be IRS rules.

What I underlined would be a good reason to me to move to a tIRA.... or perhaps leave enough to take advantage of that good stable value plan and move the rest to where you can control it... other than a stable value fund I don't see much advantage to the 457 compared to a tIRA... you should be able to get the same funds with low/no fees (I have no-fee, no-commission tIRAs with Vanguard and Fidelity).