For you retirement gurus..

[nycdisneygal]

I just left a job where I was able to contribute to a 457b. I have to decide what to do with that money now ( i am over 20 years from retirement- though wish it was sooner!). I dont have to decide anything for my 403b. Am trying to figure out the options and dont really understand the implications of each (other than lump sum). Any of you experts have insight?

 

[a1tinkfans]

Why are you not considering rolling it over directly into Another fund? Mutual etc?
I’m sure others will be forthcoming with further info
Best of Success!

 

[QueenIsabella]

If at all possible, roll it into an IRA (or similar--I'm less familiar with 457bs). If you set up an account with an outside broker--Vanguard has an excellent reputation--they can send the lump sum distribution directly to them, without taking any taxes out, and your money can continue to grow tax-free.

Sometimes, if the amount of money is very small, they insist you do a lump-sum distribution (usually, this is for less than $10k). You could still put this in an IRA, if you can cover the tax bite difference. You would have 60 days to get the money into the new account without incurring penalties.

 

[nycdisneygal]

Why are you not considering rolling it over directly into Another fund? Mutual etc?
I’m sure others will be forthcoming with further info
Best of Success!

457b can only be rolled over to 457 b. Otherwise I would have just rolled over.

I also have to specify the date I will take it now. Which can have tax implications if I have not yet retired then

 

[tvguy]

457b can only be rolled over to 457 b. Otherwise I would have just rolled over.

I also have to specify the date I will take it now. Which can have tax implications if I have not yet retired then

That is not correct. It can be rolled over into an IRA. At least the IRS says you can. A financial planner can help you with it. https://www.irs.gov/pub/irs-tege/rollover_chart.pdf

 

[alymae1010]

Anytime I leave a job, I roll my 401k in to a Rollover IRA I set up at Vanguard. A 457b should be no different per the IRS.

 

[runwad]

@nycdisneygal do you work for a municipality? My DH works for a county gov't and has a 457, deferred comp, is that what you call it? Anywho, if he were to leave early, I'd leave the money in the plan. His has great investment choices and low fee's and we could leave it in there forever if we wanted. We are in Ohio so maybe rules are different in NY.

I'd think the lifetime annuity would be a fixed monthly income you'd get for life from your 457, like a pension.

The fixed period annuity would payments for a certain number of years, I'm guessing.

I'd call your plans administrators and just ask the questions, our people are always so helpful and patient. Good luck!

 

[MomToOne]

Like others said: rollover to an IRA, someplace with low/no account fees like Vanguard (but there are others that do well in that arena too). Then invest it in index mutual fund(s) or index ETF(s) with low expenses, such as Vanguard's total stock market fund (that's just one example, not a specific suggestion for your circumstances - there's not enough info provided here for that. You need to look over all your investments and make sure you are properly diversified, etc.) If picking funds/diversifying is overwhelming to you, look into a "target retirement fund" such as the Vanguard Target Retirement 2040.

 

[nycdisneygal]

INteresting. The letter specifically says IRS does not allow rollovers for 457b. I tried calling but didnt get anywhere I will try again.
Thanks!

No, I had worked for a private university but it had a public component-- not sure how it was eligible for 457b which is mainly for govt.

 

[disney11fan]

Like others said: rollover to an IRA, someplace with low/no account fees like Vanguard (but there are others that do well in that arena too). Then invest it in index mutual fund(s) or index ETF(s) with low expenses, such as Vanguard's total stock market fund (that's just one example, not a specific suggestion for your circumstances - there's not enough info provided here for that. You need to look over all your investments and make sure you are properly diversified, etc.) If picking funds/diversifying is overwhelming to you, look into a "target retirement fund" such as the Vanguard Target Retirement 2040.

Not a fan of target retirement funds. Stay away from anyone who would sell you an anniuty.

 

[disney11fan]

Not a fan of target retirement funds. Stay away from anyone who would sell you an anniuty.

Retired now 10 years. Now 65. Lucky enough to have pension and 401k, social security and great health care. Left my 401k where it's at. I bet your fees our very low with your 401k. Talk to them

 

[MomToOne]

Not a fan of target retirement funds.

I am not a fan of them for myself, because I want more control of my portfolio, know what risk I am willing to take, have learned the diversification that is right for me and am fine rebalancing things/making trades on my own. But for folks who are not willing or able to put in that work, a well run, low cost target retirement fund can be a good choice.

 

[MomToOne]

Retired now 10 years. Now 65. Lucky enough to have pension and 401k, social security and great health care. Left my 401k where it's at. I bet your fees our very low with your 401k. Talk to them

The problem with 401ks are that many actually have high account fees compared to IRAs, and only give you limited funds to choose from. I've had some good ones at a few jobs, but most of the ones I've had over the course of my career were somewhere between mediocre and bad. It's worth the company match to put up with them while I am at a company, but once I leave it's generally better for me to rollover to an IRA. For example, right now I am paying $120/yr in account fees alone for my 401k, to invest money into a couple of the Vanguard funds I also hold in my rollover IRA which has no account fees. While it doesn't sound like much, compounded over the years, it adds up. And it just irks me to pay for something I can get for free. Not to mention I have to constantly manipulate my different accounts to get the diversification I want because my 401k only has a couple of the funds I want to invest in available.

So if you are a lucky one with a well-run 401k, then congrats! But make sure you really know if it is well run or not. Study those statements to see what fees you are paying, and study the funds it is invested in to know what their expense ratio is vs. what similar funds you could buy yourself at someplace like Schwab or Vanguard would cost you.

 

[disney11fan]

The problem with 401ks are that many actually have high account fees compared to IRAs, and only give you limited funds to choose from. I've had some good ones at a few jobs, but most of the ones I've had over the course of my career were somewhere between mediocre and bad. It's worth the company match to put up with them while I am at a company, but once I leave it's generally better for me to rollover to an IRA. For example, right now I am paying $120/yr in account fees alone for my 401k, to invest money into a couple of the Vanguard funds I also hold in my rollover IRA which has no account fees. While it doesn't sound like much, compounded over the years, it adds up. And it just irks me to pay for something I can get for free. Not to mention I have to constantly manipulate my different accounts to get the diversification I want because my 401k only has a couple of the funds I want to invest in available.

So if you are a lucky one with a well-run 401k, then congrats! But make sure you really know if it is well run or not. Study those statements to see what fees you are paying, and study the funds it is invested in to know what their expense ratio is vs. what similar funds you could buy yourself at someplace like Schwab or Vanguard would cost you.

Well said.

 

[starry_solo]

Why not take the distribution?

 

[QueenIsabella]

Why not take the distribution?

If at all possible, she's better off keeping it in a tax-advantaged account, so that it can grow for 20 years until she needs it for retirement. Even if it's a relatively small amount--say, $10k--if she takes it now, she has to pay taxes and possibly penalties on the money. It could grow to close to $100k or so if she leaves it in a tax-favored account. Sure, she'll have to pay taxes when she does, eventually, withdraw it, but the penalty issue will have gone away, and she might be in a lower tax bracket at that time (if she's not earning an income).

 

[starry_solo]

If at all possible, she's better off keeping it in a tax-advantaged account, so that it can grow for 20 years until she needs it for retirement. Even if it's a relatively small amount--say, $10k--if she takes it now, she has to pay taxes and possibly penalties on the money. It could grow to close to $100k or so if she leaves it in a tax-favored account. Sure, she'll have to pay taxes when she does, eventually, withdraw it, but the penalty issue will have gone away, and she might be in a lower tax bracket at that time (if she's not earning an income).

Right, but she actually can't. I know @tvguy referred her to an IRS publication, but based on what she wrote, she has a non-governmental 457b, which is not eligible for roll-over.

https://www.irs.gov/retirement-plans/comparison-of-tax-exempt-457b-plans-and-governmental-457b-plans
She has to take one of the four options presented to her.

Any of those four options would require taxes to be paid, but I don't believe there are withdrawal penalties since one of the options for being able to take a distribution is separation from employment without a minimum age.

 

[nycdisneygal]

Thanks again everyone!
Yes it is non-government one so thats why cant roll over....

 

[starry_solo]

Thanks again everyone!
Yes it is non-government one so thats why cant roll over....

Of the four options presented, I would take the required minimum distribution

 

[tex1989]

So if you are a lucky one with a well-run 401k, then congrats! But make sure you really know if it is well run or not. Study those statements to see what fees you are paying, and study the funds it is invested in to know what their expense ratio is vs. what similar funds you could buy yourself at someplace like Schwab or Vanguard would cost you.

Guess I am lucky! Company I work for uses Fidelity and we have access to investing in over 500 options plus we can actually buy individual issue stocks. So it's actually a pretty good deal since I also have my roll over account there and our pension plan is through Fidelity. My company covers most fees and because of the multiple accounts I get discounts on my personal stuff. Not a bad deal overall and is competative with most if not all discount brokers.