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Can I contribute to 457?
Old 05-16-2015, 12:29 PM   #1
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Can I contribute to 457?

The wife and I retired in January from the same place. We had the option of taking all of our sick time and vacation time as a lump sum or to continue to receive out paychecks until the accrued time is exhausted. We both had over 1000 hours each. We chose option 2 because we can continue to stay on the employee insurance plan during this time and its quite a bit cheaper than what we will be paying later on.

All deductions, except taxes and insurance, were automatically stopped when we retired including our 457 contributions. I will call our employer on Monday and ask about their policy but is there any law saying we cant contribute to our 457 any longer? Also, we can still contribute to our Roth IRAs correct? I assume this money is earned income?
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Old 05-16-2015, 12:34 PM   #2
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It's my understanding you cannot contribute any more to your 457 if you are retired, but I could be wrong. Seems to me if they are cutting you a paycheck you are still employed? We could only cash out vacation and it was on my last paycheck. Also, I converted sick leave to service credit so my pension would be slightly larger and I do mean slightly!
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Old 05-16-2015, 12:40 PM   #3
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I guess it depends on the definition of "employed". We still receive employee insurance rates but the employer is self insured so they can do whatever they want in that regard.

We aren't subject to any rules, restrictions or administrative policies. We can't be fired or disciplined or anything like that so I don't see how we could be considered employed.

They are just paying us in installments instead of a lump sum. That makes sense about not being able to contribute to a 457 once you retire. I wonder about the Roth though?
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Old 05-16-2015, 01:18 PM   #4
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Originally Posted by utrecht View Post
I guess it depends on the definition of "employed". We still receive employee insurance rates but the employer is self insured so they can do whatever they want in that regard.

We aren't subject to any rules, restrictions or administrative policies. We can't be fired or disciplined or anything like that so I don't see how we could be considered employed.

They are just paying us in installments instead of a lump sum. That makes sense about not being able to contribute to a 457 once you retire. I wonder about the Roth though?
IRA works by calendar year so as long as you still have earned income for the year, you can still contribute to a Roth IRA (smaller of either $6,500 or your earned income). As for 457, talk to your retirement administrator. I know for us, we're able to contribute the lump sum for accrued sick and vacation to our 457b plan when we retire.

One of our engineers retired in December 2014 and received his accrual lump sum in January or February 2015 and it counted against his 2015 limit even though he was already retired. I think the thing here is sick and vacation leave is still considered earned income even when you have formally separated from employment so it might still be possible to contribute to the 457. Again, just ask your plan administrator regarding your options.
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