Theseus
Recycles dryer sheets
- Joined
- Aug 4, 2013
- Messages
- 484
This could of, and almost did go to the pet peeve thread. DW and I ERd mid 2014 at age 58 and 8 months and 57 and two months, respectively. We have been using DWs 457 plan pre-59-1/2 exemption to supplement our pensions, which cover about 1/3 of expenses. This is all working out to plan, but the wrinkle I did not account for (purely due to my ignorance of it in the planning stage) was the mandatory 20% withholding rate on her 457 plan distributions. Normally I managed my payroll withholding to keep our taxes withheld very close to the taxes due, but intentionally let it run high last year while still working to compensate for the then future distributions. Net result was ~ $4k over withholding for 2014. That was my peeve, entirely my own mistake but paying taxes on those extra distributions in our last high income year just wasn't smart. Hopefully someone else might learn from my mistake.
So, DW will be 59-1/2 next month. Right now I am planning on rolling her 457 balance over to an IRA that will allow either 10% withholding as the default, or 0% if I select that and make quarterly payments. YTD withholding is already very close to our calculated net 2015 tax bill after trimming the gross distributions down to reflect not overpaying. I anticipate having more precise control of distributions from an IRA, and leaving amounts budgeted but not currently required, i.e. major home maintenance, vehicle replacement in the IRA where returns would presumably be better than in personal savings accounts.
Added bonus, providing it isn't scuttled by a SCOTUS decision, would be that reducing distributions would increase our ACA Premium Tax Credit at year end. Running the numbers, I find a potential for thousands in savings between federal and state taxes just for 2015, not counting PTC increase. I've already rolled my 401 to an IRA at TD Ameritrade, so I've got the mechanics of that down. DWs 457, and possibly her 403 as well could both be rolled over. A question I have for those who followed my convoluted explanation, are there any pitfalls to watch for when rolling over a 457?
So, DW will be 59-1/2 next month. Right now I am planning on rolling her 457 balance over to an IRA that will allow either 10% withholding as the default, or 0% if I select that and make quarterly payments. YTD withholding is already very close to our calculated net 2015 tax bill after trimming the gross distributions down to reflect not overpaying. I anticipate having more precise control of distributions from an IRA, and leaving amounts budgeted but not currently required, i.e. major home maintenance, vehicle replacement in the IRA where returns would presumably be better than in personal savings accounts.
Added bonus, providing it isn't scuttled by a SCOTUS decision, would be that reducing distributions would increase our ACA Premium Tax Credit at year end. Running the numbers, I find a potential for thousands in savings between federal and state taxes just for 2015, not counting PTC increase. I've already rolled my 401 to an IRA at TD Ameritrade, so I've got the mechanics of that down. DWs 457, and possibly her 403 as well could both be rolled over. A question I have for those who followed my convoluted explanation, are there any pitfalls to watch for when rolling over a 457?