Question on 457 Roth (deferred comp)

[ReadyAimFired]

I have a question about the above title. My city just recently allowed us to elect that our contributions be "after tax" and designated them 457 Roth accts. I am wanting to retire at 53 and I know that my withdrawals will not be penalized or taxed for the roth contributions. My question is, 100k or so is before tax and now 65k or so is roth contributions, when I go to take withdrawals will I be able to designate that I want the roth withdrawals first so that I am not penalized for withdrawing the "before tax (non roth) contributions prior to age 59 1/2?

I know that this is a question I should ask my rep but they only come to the station on a select day of the month and I missed it this month.

RAF

 

[Walt34]

It really depend on the plan specifics, you'll have to ask the rep. They do have telephones don't they? Seems silly that you'd have to wait for a once-a-month station visit to get a question answered.

 

[ReadyAimFired]

They do have phones but it's press 1 for this and 1 for that.....one question always leads to another and the 18 year old girl who answers the phone never knows the answer.

 

[Walt34]

They do have phones but it's press 1 for this and 1 for that.....

Understood. I'd love to strangle the dolt that invented that system.

 

[Slow But Steady]

Understood. I'd love to strangle the dolt that invented that system.

I've heard that if you swear a blue streak at those systems, they will send you directly to a customer service agent. I've never tried it, though, because it just seems improper, somehow, to swear at a machine on the other end of a phone line.

 

[Boss2014]

Does the plan have a website you can access?

 

[MrNickel]

Depending on the plan 457s are taxed as regular income upon separating from service. It doesn't matter about age so 59 1/2 is inconsequential ie no penalty. Also different with the ROTH 457 is there are required distributions at 70 1/2.


Sent from my iPhone using Early Retirement Forum

 

[ReadyAimFired]

Thanks you guys, I may just call HR and get our direct rep at Lincoln Financial. One of my resolutions this year was to try and curb my cursing so I thought I would get with you smart folks first before confronting the press 1 for English system! Their website is useful in some ways but not very informative. Thanks!

RAF

 

[PhrugalPhan]

Like previously said, it depends on your plan specifics. In my case, my 457 has, as of now, the requirement that I cannot specify which pool of money to withdraw from. But I think a more important question is why you don't want pre-tax funds pulled out. Most, if not all, 457 plans allow for withdrawals at any age after retirement penalty free. This is what you need to check on.

In my case, I will be wanting to withdraw pre-tax monies at first. The way around that is to withdraw funds and roll over the Roth portion to Roth IRA. A PITA, but it is what it is. Hopefully down the road that rule will be changed for me.

 

[utrecht]

Dont you lose the ability to withdraw penalty free at any age once you roll to a Roth?

 

[PhrugalPhan]

Dont you lose the ability to withdraw penalty free at any age once you roll to a Roth?

If you're asking me, I suppose that is true, but only for the earnings there after, not the contributions (or so I understand it). I guess the five year rule would be in effect as well if it is a new IRA, not a previously existing one. In my situation I will have enough funds in other locations, and I will be old enough, that this will not be a concern for me as it could be for someone retiring earlier. Also, in general you want Roth money to come out later (not earlier) when you have SS income and other income streams so as to minimize taxes. At least that will be my case with a pension, 457 funds, and SSI (YMMV). I want my Roth bucket to be as full as possible later in life to keep my money in my pocket, not Uncle Sugar's pockets.

In any case, I would think there are various ways to arrange your money so this wouldn't be an issue if it applies in your situation.