Employer 457 Plan is being terminated by year end 2021
Hello – a few questions arise as to my choices – 1) If I “rollover” and do a conversion to an existing Roth, will I be subject to the 5 year rule? Some ROTH monies have been in there since 1998, when conversion was first allowed. Also, looks like a liquidation will have to occur, and not an “in-kind” rollover, which is really what I prefer, with a check being sent……. OR – Can I do a direct “rollover” from the 457 to a regular established IRA, and not suffer any consequences. (I am over 59.5). Any reason not to do it? I have another 457 I could “rollover” to (I think – have to check it if they will accept it). Anything else I should be concerned about and not even know about? THANKS!
Permalink Submitted by Alan - IRA critic on Mon, 2021-11-01 23:52
Your Roth IRA is now qualified, so there are no more 5 year holding periods. Any amount already in your Roth IRA or converted to your Roth IRA will be 100% tax free when withdrawn from your Roth IRA. However, if you are eligible for distributions from your terminated govt 457b, and you do a direct rollover to a Roth IRA, the rollover into the Roth IRA will be taxed. You should not roll over such a high amount that your tax rate is higher on the rollover than it would have been in retirement when withdrawn from a rollover IRA. You may have to settle for a partial rollover to Roth with the rest rolled to a TIRA to keep your current tax bill under control.
Permalink Submitted by Deirdre Totten on Tue, 2021-11-02 00:03
Hi Alan – I had an additional question to reconfirm about being able to do the direct “rollover” from the terminated 457 plan to a regular established IRA, and not suffer any consequences.? (I am over 59.5). Can I do this – or does it have to go into another 457 plan? AND can you recommend a good conversion calculator. Thx