457 Conversion
I have a 457 plan with a former employer, left the company 6 years ago to retire early and be a stay at home dad. My current age is 48 and my employer pension is available at age 55 to drawl on, 7 years away. I would like to drawl a fixed income from the 457 plan if that is possible to continue the “good” life until my pension begins.
Can I convert/rollover the 457 to a IRA and using the 72T rule then begin taking a distributions from it ? Is it to late to convert ?
All suggestions and thoughts are welcome.
Thanks
Permalink Submitted by Alan Spross on Sat, 2008-09-20 23:32
Not sure what you mean by “convert”, perhaps to a Roth IRA?
You can only transfer the 457 plan to an IRA if it is government 457 plan. Since there are no early withdrawal penalties on 457 distributions, perhaps you should check with the plan to see if they offer periodic distributions with some flexibility to adjust. If not, and IF you have a government 457, you could transfer it to an IRA and start a 72t plan although 11 plus years is a long time for such a plan to be expected to meet your exact withdrawal requirements, and you must distribute the exact amount required until 59.5. Since the penalty for busting a 72t plan is retroactive penalty and interest all the way back to the first distribution, busting the plan in the later years would be a disaster. You cannot stop at 55 either, you must continue until 59.5.
It also appears that drawing down your retirement funds this early is not a good idea and would probably jeopardize your long term retirement security unless you expect an inheritance or other boost to your assets. Since you have not been working for 6 years, you probably have an idea of what your expenses are, particularly for healthcare and know that they continue to escalate each year. So if you started a 72t plan now, you would have to set it up to take more than you need now so that you can save that money for when the plan will not provide you with enough to live on each year.
If you want to make these retirement assets last, the best option is to first see if the plan will allow you to take periodic distributions rather than a lump sum. That way, you at least avoid the risk of a 72t plan.